Stocking Up on the Meaning of Stocks

As a stockholder in a company you become, in a very real sense one of its many owners or shareholders. This means that everything the company owns is yours, in a sense. You can even think of it as owning a very small bit of every piece of furniture or equipment that makes up the company. Being an owner has benefits in that when the company makes earnings you are entitled to a share in those earnings. It also means that you have voting rights that come along with the stocks you own.

As proof of you stock ownership there is a stock certificate. This ornate slip of paper is tangible proof of your ownership in the company. Though these certificates once were distributed to stock owners, today you never see them as they are electronically kept by brokerage firms and called holding shares. In this format your shares can be traded more easily and is the preferred form for most people who want their stocks to grow. In the past the certificate holder had to transport his certificate down to the brokerage firm if he wanted to sell his stock. Now of course this has all become an electronic exercise where a phone call or email can make the sale almost instantaneous.

Though you are an owner in a publically held company, it doesn’t give you the power to dictate any of the business practices of that establishment. You are given a vote for each share you hold toward the election of the board of directors. This occurs at an annual meeting and this is the sole power you can exercise in the running of the business. Stockholder in Microsoft cannot contact Bill Gates and instruct him in the finer points of information systems. Nor can you walk into a Cocoa Cola plant and grab a six pack when the notion hits you.