What are Shareholder Voting Rights in Michigan?
Corporate shareholders have the right to vote on various aspects of the company’s operations. The scope of a shareholder’s voting rights depends on applicable corporate law and a corporation’s governance documents. Here’s what you need to know about your voting rights as a corporate shareholder so that you can better protect and advocate for your financial interests.
Understanding Shareholder Voting Rights
Shareholder voting rights govern how shareholders exercise their management rights under corporate law and a corporation’s governance documents. Although corporate law gives boards of directors the authority to handle the day-to-day management of a corporation (which a board can delegate to officers under the board’s supervision), shareholders have the right to vote to approve some high-level, strategic decisions or actions by a corporation, such as:
• Election of directors
• Amendments to corporate bylaws and charters
• Approval of mergers or sale of the company
• Issuance of new shares
• Dissolution of the corporation
• Conversion of the corporation to another business form or transfer to another jurisdiction
• Retention of outside auditors
A corporation’s charter and bylaws may give shareholders the right to approve other corporate decisions, such as acquiring another business, approving executive compensation packages, selling significant business assets, or incurring specific types of debt.
Types of Voting Rights
The different types of shareholder voting rights can vary between common and preferred stock. Common shares typically give shareholders one vote per share. However, preferred stock may have super voting rights, giving each share of preferred stock multiple votes. Alternatively, preferred stock may have limited voting rights in exchange for other benefits or advantages.
Corporations can also choose between various types of voting methods, depending on the decision at issue. Some of the most common types of corporate voting methods include straight and cumulative voting. In straight voting, each share gets one or more votes depending on the class share’s rights; shareholders must vote their shares in an all-or-nothing approach, allocating all their votes to the action or board nominee they choose. In cumulative voting, shareholders can allocate the total number of votes their shares provide as they see fit. Cumulative voting most frequently occurs during board elections when shareholders must vote for multiple nominees equal to the number of open board seats (getting five votes for five open seats, for example), which allows minority shareholders to pool their votes together to elect a single director who otherwise might not win in a straight vote.
The Importance of Proxy Voting
For corporations with larger numbers of shareholders or when shareholders in a closely held corporation choose to act in concert, shareholders typically vote by proxy. In proxy voting, shareholders delegate their voting rights to a representative who votes on their behalf, relieving them of needing to appear at the shareholders’ meeting. Today, federal securities regulations govern corporate proxy voting, including corporate officials’ use of proxy statements to solicit shareholders’ votes for proxy voting.
Contact a Corporate Lawyer Today
A shareholder disputes and oppression attorney from August Law can help you understand and assert your shareholder rights and advocate for your financial interests. Contact us today for a confidential consultation with our legal team to discuss your rights and options.