Which One of The Following Parties Has Ultimate Control of a Corporation?

Which One of The Following Parties Has Ultimate Control of a Corporation?

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Which One of The Following Parties Has Ultimate Control of a Corporation? 

The shareholders of a company are those who have the ultimate control of the corporation.

Many incorrectly assume that the party or body that controls a company is:

  • The chairman of the board
  • The company’s CEO 
  • The company’s CFO 
  • The company’s COO
  • The board of directors as a body

In short, the shareholders are the ones who exercise the most control over the company. 

They do that by electing the members of the board who in turn make the operational and strategic decision for the company.

The board of directors will then appoint the Chief Executive Officer who in turn will engage the Chief Financial Officer or Chief Operating Officer.

At the top of this chain, the shareholders have the most power as they are able to appoint the members of the board.

Shareholders 

Shareholders (also known as stockholders) are individuals or entities who own at least one share of stock in a company.

When a person or entity owns shares, we refer to them as equity stockholders.

In essence, shareholders are the “owners” of the corporation.

If the company does well, the value of the shareholders’ stock appreciates.

Conversely, if the company does poorly, the value of the company shares decreases.

What’s important is that shareholders have limited liability.

In other words, they are not personally responsible for the company debt.

If a company goes bankrupt, the shareholder’s loss will be limited to the investment required to acquire the shares.

Takeaways 

So, who has the ultimate control of a corporation?

Let’s look at a summary of our findings.

Which One of The Following Parties Has Ultimate Control of a Corporation?

  • The ultimate control of a corporation is in the hands of its stockholders
  • The corporation’s stockholders have the power to elect the members composing the board of directors
  • The board of directors exercise oversight over the company’s operations and should make decisions based on the best interest of the corporation (shareholders’ best interest)

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