Voting shares are a type of stock that investors can buy in publicly traded companies. They give shareholders the right to voice their opinion in certain company decisions, such as the election of corporate board members and other corporate actions.
As an investor, it’s important to understand how voting shares work and how they differ from other shares you might buy. Learn what voting shares are, their features and advantages, and how to buy voting shares in a company.
Definition and Example of Voting Shares
Voting shares are shares of stock offered to investors by public companies that come with voting rights in the company. Voting shares are usually common stock, the type of shares that are most frequently issued by corporations. All common stock comes with voting rights. However, a company might choose to offer more than one share class of common stock, with each class having a different level of voting rights.
As an example, Google offers four different shares of stock: Class A common stock, Class B common stock, Class C capital stock, and preferred stock. Both the Class A and Class B common stock are voting shares, meaning shareholders who own that stock have a right to vote on company matters. However, Class A stockholders are entitled to one vote per share, while Class B stockholders are entitled to 10 votes per share.
How Voting Shares Work
When you purchase voting shares in a company—usually in the form of common stock—you have the right to vote on corporate matters at the company’s annual meeting as well as special meetings throughout the year.
Before a vote, a public company sends each owner of voting shares a proxy statement, which lets them know the vote is taking place and what matters they’ll be voting on. Topics up for a vote often include the election of corporate board members, approval of executive compensation, and the adoption of proposals that other shareholders put forth.
If you own voting shares, you can exercise your right to vote by attending the shareholder meeting. You can also vote by proxy, which doesn’t require you to attend the meeting in person.
Types of Voting Shares
A company might offer more than one class of voting shares. When one class has more voting rights than another, it may trade at a higher price. In many cases, the class with more voting rights isn’t publicly traded at all; instead, it’s designed to give certain individuals more power within the company.
Individual investors can’t purchase Class B stock, which is only available to company insiders. In fact, Google’s founders Larry Page and Sergey Brin own enough Class B stock to single-handedly determine the outcome of corporate matters, including elections to the company’s board of directors.
Google also prevents individual investors from owning Class B stock. If a Class B stockholder sells or transfers their shares to another individual, those shares automatically convert into Class A shares, which come with just one vote per share. The only exception is when one of Google’s founders transfers shares to the other or when a Class B stockholder transfers shares for tax or estate-planning purposes.
Voting Shares vs. Nonvoting Shares
Voting shares (also known as common stock) are the type of shares that companies most frequently issue, but they aren’t the only type. Many companies also issue preferred stock, which doesn’t come with voting rights.
Instead of voting rights, preferred stockholders have the right to receive dividends before common stockholders. They also have more of a legal claim to funds if a company goes bankrupt or is liquidated, meaning they’ll receive their money before common stockholders and other debtors.
|Voting Shares||Nonvoting Shares|
|Common stock||Preferred stock|
|Grants ownership in company||Grants ownership in company|
|Voting rights||No voting rights|
|May come with dividends||Preference to dividends|
|Lesser claim to assets in a liquidation||Greater claim to assets in a liquidation|
Are Voting Shares Worth It?
When you invest in a company that offers multiple types of stock, you’ll have to decide which type is right for you. Often, you’ll have to choose between common stocks (that come with voting rights) and preferred stocks (that lack voting rights but pay dividends before common stock).
Ultimately, choosing between the two comes down to your investment goals. Both common stock and preferred stock give you ownership in a company. And while you have the potential to see capital gains with either type of stock, common stock is far more likely to rise in price, offering greater potential long-term profit.
On the other hand, preferred stockholders receive dividend payments before common stockholders. So if you’re investing for fixed-income and are okay with giving up both the capital gains and the voting rights in exchange, then preferred stock might be right for you.
What Voting Shares Mean for Individual Investors
As an individual investor, you might be surprised to learn that you have some power over the direction of the companies that you invest in. Your common stock gives you the right to vote on company matters at the annual shareholder meeting or special meetings throughout the year.
With some companies, voting rights aren’t quite as impactful as they sound. Typically, large institutional investors like mutual funds or dominant individual shareholders hold more sway over the voting outcomes.
How To Get Voting Shares
Corporations must issue at least one class of common stock, which allows investors to attain voting rights in company matters.
If you wish to purchase voting shares in a company, it’s important to first understand the different types of shares the company issues. If it issues multiple types of common stock as well as preferred stock, then you’ll want to be sure you’re buying the right type of shares.
You can research the different types of stock a company offers using the EDGAR database available through the U.S. Securities and Exchange Commission.
Once you’ve identified the shares you want to purchase, you can buy them through an existing or new online brokerage account. Simply log in to your account, search for the stock you wish to buy, and place an order for the number of shares you want.
- Voting shares are a type of stock that gives investors the right to vote on corporate matters, including the board of director members and executive compensations.
- Most often, voting shares come with common stock, though a company may offer multiple common stock classes that offer different voting rights.
- Not all shares are voting shares. Preferred stock comes with the first right to dividends and to assets in a liquidation, but it doesn’t come with voting shares.
- Companies most frequently issue common stock, which offers voting rights, and it’s easy to purchase through any online brokerage firm.