Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
proportionate to their number of shares. For example, Microsoft Corporation (MSFT) comprises 5 billion shares of stock as of this writing. If you own 10,000 shares of Microsoft, this means that you own 10,000/5,000,000,000 of Microsoft. In other words your share of ownership in Microsoft would translate to .0002% of the total company.Not much, unless of course you consider that Microsoft stock sells for about $100, which means your shares would be worth a cool million dollars. For your information Bill Gates owns about one billion shares of Microsoft, which not only makes him the largest stock holder in the company (20% ownership) but also the richest man in the world, worth $100 billion just in Microsoft stock.
So now you may wonder how could a company with so many owners keep its focus and operate efficiently? The answer is similar to how democratic countries operate. Take the US as an example. I, as a US citizen, own a piece of this country, but I don't run the US. Instead I let my voice be heard through the democratic process of voting. I vote for congressional, presidential, and gubernatorial candidates based on their agenda and their promises, and if the candidates secure majority votes they are elected into the office and I may see some of my hopes realized while they serve their terms.
A public company operates in a similar way, except that each share counts as one vote. Shareholders vote for a board of directors consisting of several (hopefully) high caliber candidates with a good sense for running a business. The board does not usually involve itself in the day-to-day activities of the company. Instead the board of directors appoints a CEO (Chief Executive Officer), who may also be a board member, to run the company. So as you can see, even though it may seem that the CEO owns the company, it is actually the shareholders (or stockholders) who own and indirectly run the company. Of course the more shares a stockholder has, the more influential his votes would …
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