How shareholders can hold directors accountable for their actions

On Behalf of | Dec 13, 2021 | Business Litigation |

Corporations must have shareholders who ultimately are the owners of the company. In some instances, especially for smaller businesses, the people who run the company may also own all of the stock in the company. However, especially for larger businesses, it is common to have shareholders who do not actually manage or run the business in any way.

Even though shareholders may not actually run the company, they are still partial owners in the company and the value of their shares are directly affected by the success of the company. They have an interest in ensuring that board members, directors and managers are running the company correctly. If they feel like the people in charge have made poor choices or are not addressing a specific concern, they can let the appropriate people know of their concerns.

Basics of derivative lawsuits

Though shareholders can speak up, this does not mean that their concerns will be listened or addressed properly and in some instances their concerns turn into real problems for the company. If this occurs shareholders can initiate derivative lawsuits against those responsible for the problems that arose. Through these lawsuits they address their concerns and demonstrate how the corporation was negatively affected by the decisions of those in charge. If they are successful any damages are given to the corporation not the individual shareholders though.

It is important that directors and managers always run the business in a way that is best for the company and its shareholders. In the long run, bad managerial decisions can be detrimental to the company. Shareholders have rights to hold bad managers accountable. Experienced attorneys understand these complex matters and may be able to guide one through it.