[Institution’s Name]
Organizations have been termed as a place in which numerous professionals work together for the achievement of a single and pre-specified goal . Organizations have number of departments in particular and every department has to play their part in order to increase both the economical and strategic strength and belongings of an organization.
It is extremely important for an organization to keep all of their users in a perfect manner . There can be number of users related to an organization, like management, employees and shareholders as well. All of these users have their own significance and importance lies in a nutshell. It is important for an entity to satisfy the needs of their every user in a perfect and well organized manner. Shareholders are one of the users of an organization. Shareholders are of two different kinds, internal shareholder and external shareholder.
Internal shareholders are the people who have stakes in the company internally, while stakeholders which have the association with the company externally are known as external shareholders. Shareholders have been referred as the people who have the largest amount of risk associated with the company’s profitability. The main reason behind this fact is the shaking profitability of the company in particular. Organizations have to be in regular touch and in communication with their shareholders because they are the actual owners of the company.
According to the Internal Accounting Standard Board (IASB), shareholders have the right to become an integral part of the decision making process of an organization. Every decision which has a direct or indirect association with the company’s profitability or strategic value must be furnished in front of the shareholders in order to prevent from any sort of legal suit. This particular communication between the shareholders and management could be done in an Annual General Meeting (AGM) or Extra Ordinary General Meeting (EOGM).
Both of these kind of Annual Meeting (AM) are important for an organization and their shareholders to share different information and other aspects pertaining to the company with each other. Shareholders deem extremely interested in enhancing the financial productivity and positioning of the organizations, therefore, they are more towards Organizational Oriented . It is vital for an organization to take effective economic and non economic decisions in order to sustain in the industry for a long span of time and for the sake of the same thing, concerning with the shareholders is an important provision for an entity. Shareholders have the right to accept or reject any offer which they think are effective or ineffective for the company’s operations. Shareholders engagement with the organizations and its management not only restricted only with the decision making stance of a company, but it also connected with increasing the managerial functions of the company .
Some people have the perception that shareholders can only give their feedbacks and talk to the management in the organized AGMs or EOGMs because these two events are professionally organized and managed events in which the shareholders have the power to influence their decisions on the management of the company. It is important for an organization to obey the instructions of their shareholders because without the funds of the shareholders, an organization cannot do anything. The concept of Corporate Governance and Ethics varies from industry to industry, but the concepts related to shareholders and Annual Meetings are not in the differentiating phase .
Shareholders are some of the most important personnel for an organization and entities have to consider them in order to increase their financial belongings. Shareholders have the right to talk to any of the management official of a company other than the Annual General Meeting (AGM). Some of the organizations not allowed their shareholders to talk to them other than the AGM, but the concept of Corporate Governance and Ethics is totally against with the same as according to this concept, organizations should play their role to enhance the morale and confidence level of the shareholders for the sake of their company. Therefore, organizations should permit their shareholders to talk and concerned to them regardless of any formal invitation or a meeting. Shareholders also have the right to organize an Urgent Meeting with the management of a company without any prior intimation.
Apart from the profitability, managing the liquidity ratio of the company up to a certain levels and complying with the restrictive covenants and addressing the company policies are some of the major decisions which have to take by the management with the help of the shareholders. Management has no right to disobey any of the order of their shareholders which have been imposed against increasing profitability, managing liquidity or complying with the restrictive covenants.
References
Gupta. (2004). Contemporary Auditing. New York: Prentice Hall.
J. J. Du Plessis, . M. (2005). Principles of Contemporary Corporate Governance. New York: Saga.
Sharma, D. A. (2010). Company Law and Secretarial Practice. Chicago: Adventure Work.
Shrestha, M. K. (1992). Shareholders' democracy and annual general meeting feedback. Chicago: McGraw Hill.
