Corporate Characteristics Proposal Characteristics of Term Paper

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Common stockholders own a proportionate amount of ownership in the company, and receive dividends and votes for Board of Director members in proportion to their ownership of stock. Common stock yields higher returns, but owning common stock carries more risk, for the investor as "if a company goes bankrupt and liquidates, the common shareholders will not receive money until the creditors, bondholders and preferred shareholders" ("Stock Basics: Different Types of Stock," 2007, Investopedia).

Preferred stock comes without voting rights, depending on the company, and yields a fixed dividend in perpetuity. Preferred stock holders are paid before common shareholders. "Preferred stock may also be callable, meaning that the company has the option to purchase the shares from shareholders at anytime for any reason" ("Stock Basics: Different Types of Stock," 2007, Investopedia).

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It is also possible for companies to issue different classes of stock with different voting rights. "For example, one class of shares would be held by a select group who are given ten votes per share while a second class would be issued to the majority of investors who are given one vote per share" ("Stock Basics: Different Types of Stock," 2007, Investopedia). This is another way for the founders of the corporation to retain a certain amount of control over the individuals who hold office on the Board of Directors and what types of decisions are made at shareholder's meetings.

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