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What are Voting Shares?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 06 November 2016
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Voting shares are shares of stock in a company that come with voting rights allowing people to participate in decisions about corporate policy and board membership. They are usually common stock, also known as ordinary shares, in contrast with preference shares, a different class of stock that comes without voting rights. Voting shares tend to be more valuable than non-voting shares, as they allow for people to not only receive benefits from stock ownership, but to make decisions about how the company should be run.

Stockholders who have such shares in a company have an opportunity to vote when new policy is proposed and when major decisions like mergers and acquisitions are under discussion. In addition, they can vote out members of the board and replace them, and participate in the selection process when members of the board step down voluntarily. This allows them much more control over how the company is operated, providing them with a way to directly influence the company's activities and potentially increase their returns.

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People who hold voting shares can also force decisions by voting in a block. If people agree to oppose a merger, for example, they can vote against a recommendation made by the board to prevent the merger from happening. The degree of control provided with voting shares leads many companies to hold such shares back to avoid situations where stockholders vote against the wishes of the management. In family-held companies, these shares may be retained by family members who agree to work together on management matters.

An individual or company who holds 51% or more of the voting shares in a company has a controlling interest, allowing that person or company to decide the outcome of votes when matters are put to a vote. Voting in a block can allow people with minority interests to effectively have a controlling interest, as long as they agree to work together consistently. For stockholders, there can be incentives for cooperation when it comes to major votes, such as forcing a company to negotiate a deal with more advantages for them by threatening to vote against the deal.

Documentation accompanying stocks indicates whether they are voting or non-voting shares. When such stocks are sold, the right to vote is transferred along with the title to the stock. Companies have no control over sales on the secondary market and it is possible for a person or company to buy up voting shares to obtain a controlling interest.

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