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What is a Voting Stock?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 10 December 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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Voting stocks are shares of stock issued by a licensed corporation that provide the responsibility and privilege for the shareholder to vote in meetings dealing with the function of the company. Not all stock carries privileges of this type. While nonvoting stocks will provide some benefit to shareholders, voting stock typically provides a higher rate of return along with the enhanced ability to have voice and vote in company matters.

Many companies will issue more than one class or type of stock. As an example, a company that operates with an employee stock ownership plan usually will issue one level of stock for company executives and upper management, and a different class or level of stock for hourly employees and mid-level managers. Shares that would function as voting stock are extended to the executive employees of the company, while mid-level managers and hourly employees receive non-voting shares.

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When a company issues two classes of stock, the voting stock will often provide several benefits not associated with the nonvoting stock. First, there is the matter of being able to vote on issues that are facing the company. Shareholders with voting stock will have the right to express their opinions of the actions under consideration, and can vote according to those opinions. Shareholders who hold the non-voting stock will not be able to directly express an opinion and will rarely if ever be invited to vote on any issue. One possible exception is if the company wishes to end the current stock program and replace it with a different compensation package.

A second benefit for investors who hold voting stock is a higher rate of return. This may be realized due to the unit price of each share, or due to the fact that investors who currently hold voting stock often have more opportunities to acquire additional shares before they are offered to the general public. This means that additional shares of a voting stock that is performing well can greatly enhance the overall value of a stock portfolio.

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