The Role Shareholders Play in Corporate Governance

Shareholders play a crucial role in the corporate governance of companies. To put it simply, a shareholder is someone who owns shares or stock in a company. This ownership of shares can be acquired in different ways, such as contributing to the capital of the company during incorporation, by purchasing shares or inheriting them from a deceased shareholder.
Once someone becomes a shareholder, they have certain rights, responsibilities, and obligations that are mainly outlined in the company’s constitution and the Companies Act, 2019 (Act 992) to ensure corporate governance. These rights empower shareholders to participate in and vote at general meetings. This ensures that they have a say in important decisions that affect the company’s direction and strategy.
Furthermore, shareholders also have the power to appoint and remove directors who are responsible for managing the company. This gives shareholders the ability to ensure that the company is being led by competent individuals who act in the best interest of the company and its shareholders.
Having a strong corporate governance framework in place is essential to protect the rights of shareholders. This means that in promoting corporate governance, shareholders have the legal right to take action against the directors or the company itself if they engage in any misconduct or fraudulent activities. This helps to maintain the long-term sustainability of the company and instills confidence in investors.
In summary, shareholders are vital stakeholders in a company and, by virtue of their ownership have the right to participate in decision-making processes, appoint directors, and ensure that the company operates ethically and transparently. By exercising their rights and promoting good corporate governance, shareholders contribute to the overall success and growth of the company.