Reaction Paper On The Shareholders Rights Critical Thinkings Examples
Type of paper: Critical Thinking
Topic: Elections, Voting, Investment, Company, Stock Market, Economics, Organization, Ownership
In the present day, many countries allow the shareholders to exercise their voting rights in the respective organization when it comes to choosing of the directors and other important matters that would require the shareholders’ intervention through the voting process. Therefore, it is essential for the shareholders to exercise and understand the voting rights to avoid exploitation by other parties who would have developed self-interest in the organization. On the other hand, nonetheless, the shareholders should allow for total disclosure concerning the organization because it helps the voters make informed decisions related to the firm. Thesis statement: an analysis on the shareholders voting rights provides an insight on how the shareholders can exercise their voting rights.
Nonetheless, the organizations should not allow vote buying in the organization because it could lead to development of self-interest issues. New vote buying overrides the takeover and handling of new public companies because the shareholders could procure double rights thereby affecting the ownership of the acquisition. In the public companies, the some of the shareholders could team up in order to increase their voting rights thereby taking advantage of the situation and lead the company in order to benefit themselves. However, in most cases, the economic ownership accompanies the voting rights, but one could lend the shares to an investor, thereby withdrawal of the economic ownership on the company. As a result, the borrower of the share enjoys the benefits of the shares in the organization but cannot exercise the voting rights.
Nevertheless, the authorities lag behind in terms of regulation on the voting rights in the companies. As a result, most of the shareholders and investors tend to exploit the companies for economic benefits. Therefore, the regulatory authorities need to streamline the system by enforcing total disclosure of all the information at the disposal of the seller of the voters’ rights. Therefore, the sellers should provide adequate information in relation to the reasons behind selling the voting rights. On the other hand, the organizations could also apply technology of the new buying vote where there is a clear separation between the voting right and the economic ownership.
However, the voting rights and the economic ownership should observe cost effectiveness because it encourages investors to increase the investment level thereby leading to economic growth in the firms. In addition, the separation of both the voting rights and the economic ownership promotes a free flow of the activities in the firm. As a result, it enhances maximum exploitation of the resources because the shareholders with the voting rights could sell them to investors who have adequate knowledge concerning the investment decisions. As a result, it leads to an upsurge in the growth and development of the liquidity in the organizations.
Conversely, the empty share voting in the investors who have a negative economic interests leads to them receiving profits the moment the share prices decline. Therefore, the authority should eradicate such elements because it encourages exploitation of the company resources at the expense of the shareholders. For this reason, they deny the shareholders the rights to enjoy the fruits of the shares because they do not get a share of the profits made. Therefore, if the authority does not regulate it, it could increase enmity and inhibit investment opportunities in the firms.
Therefore, the relevant authorities have the obligation of overseeing the voting rights to ensure that they do not possess any exploitation element from the investors. Therefore, they should act as the shareholders’ watchdogs to keep in check the investors who purchase the voting rights or the economic interests. Nonetheless, for efficacy in the voting rights in an organization, total disclosure should exist to avoid exploitation of the parties involved.
Nevertheless, the directive 2007/36 EC, outlines the rights that the shareholders needed to exercise as a way of strengthening their rights in the ownership of the company. However, the directives aim was to modernize the company law to enhance corporate governance. Nonetheless, the directives contained some drawbacks that could constraint the voters when it came to their voting rights. For instance, the directive would encourage the non-disclosure of the information thereby leading to voting hitches among the investors and the shareholders. As a result, the non-disclosure would lead to an upsurge in the conflict levels between the investors and the shareholders because in case of any misunderstanding, they would blame each other. Nonetheless, the directive aimed at harmonizing the democratic rights to both the shareholders and the investors thereby reducing the conflict rates.
In addition, the directive aimed to alienate the discrimination that existed against the citizens because it provided a platform where the citizenry could also invest in the shares in the financial markets. As a result, it would lead to a consistent economic growth rate in a country thereby improving the people’s living standards. However, the directive gave the shareholders an overall advantage because their preference would prevail when it came to voting rights. Therefore, giving a priority in voting helped them to develop a sense of belonging thereby enhancing a peaceful coexistence with the investors.
On the other hand, encouragement of the cross-border voting would help encourage free circulation of capital thereby economic growth and development. For this reason, both the shareholders and the investors would democratically participate in the meetings without discrimination. However, voting by proxy enhanced the democratic rights among the parties involved thereby creating an ample environment that promoted growth in the company investments. Nonetheless, the directive that touched on the record date and the shareholders identification failed to outline clearly its need. It is because, it would conflict with the technological advancements that would provide accurate and faster dates as opposed to the manual work. However, the directive remained hushed on who should exercise the voting rights between the investors and the shareholders. For this reason, it provided room for possible conflicts between the two parties thereby affecting the firms’ performance.
On the other hand, hiding the identity of the shareholders resulted to a decline in the investment rates due to the uncertainties associated with the non-disclosure. As a result, it became difficult for the investors to trust the firms due to the security issues related to the capital injected in a firm. Therefore, the laws and the directives should aim at protecting both the shareholders and the investors when it comes to investment in the different companies. Nonetheless, both parties should exercise total disclosure to ensure that an individual understands everything related to the voting rights issue and the economic ownership. Therefore, it helps in the eradication of the conflicts that arise when the parties cite exploitation by the other. Nonetheless, the shareholders should maintain their voting rights because when the investors come in the shareholders detect some elements of security issues.