A person or organization that owns and controls more than 50% of the outstanding shares of the firm is said to be the majority shareholder. An individual or organization with a majority of the vote shares has enormous power over the corporation. The ability to vote on corporate decisions, such as who should serve on the board of directors, is granted to shareholders who possess vote shares.
An individual or legal entity can have a big impact on how the firm is run if they possess the majority of the vote shares.
- if the majority shareholder also owns vote shares, they have the ability to control the company’s direction through their vote power because vote shares allow the shareholder to cast a vote on a variety of corporate matters, including who should serve on the board of directors;
- the only time a supermajority is needed to make a decision, however, is in those situations.
Understanding the Majority Shareholder
The company’s founder is frequently the majority shareholder. However, in the event of a long-running company, the largest shareholder may also be the founder’s ancestors. The dominant shareholder, who holds more than half of the vote shares, plays a significant role in the company’s business operations and strategic direction. They could be able to appoint a new board of directors or change the corporation’s executives, for instance.
Nevertheless, not every business has a majority shareholder, and private businesses are more likely to have them than public ones.
It is also true that the majority shareholder’s function might differ significantly from company to company for businesses having a majority shareholder. While some want to actively participate in daily operations, others delegate management to business leaders. One of senior management, such as the CEO, may or may not be the company’s largest shareholder (CEO). This scenario is more probable for a smaller business with fewer shares.
Other institutions with bigger stock holdings may be included among the investors of larger companies, such as those with market capitalizations in the billions of dollars.
- An exception to the right of the majority shareholder to vote is if a supermajority is required for a specific vote issue, or if some companies’ bylaws limit the authority of the majority shareholder;
- a majority shareholder is a natural or legal entity that owns more than 50% of the company’s shares;
- if the majority shareholder owns vote shares, they determine the direction of the company by vote.
An Example of a Majority Shareholder
Frequently, corporations that own a controlling interest in several businesses are the majority shareholders. For instance, Warren Buffett, the CEO of Berkshire Hathaway, owns a controlling interest in several other businesses.
The primary stakeholder of other firms is Berkshire Hathaway. However, Berkshire Hathaway also has stockholders. But there is no single stakeholder that owns a majority of Berkshire Hathaway.
There aren’t many domestic or well-known corporations that have a majority shareholder since most majority shareholder companies are quite tiny (since these companies tend to be larger). Dell Technologies Inc. is a notable exception.