I have heard this phrase many times from companies and the executives of companies: “we have an obligation to our shareholders”. While people do hope that a company stock that they own goes up, that company has no dependence on the price of a share of stock.
Companies decide to go public to get an additional investment in their company from outside investors. When the company decides to make an Initial Public Offer (IPO), the desired market capital is determined and the amount of shares to get to that capital is determined for a reasonable asking price per share. The company allots a number of shares for the CEO and other employees to ensure that one person or a few have the majority of the stock and have a majority ownership of the company. Then the rest are offered to the public to receive the desired investment. After all of the initial offering is complete and those shares are sold, the company does not receive any additional money.
Say I buy a share of a stock at its IPO. I pay the company for their asking price and now I own the stock. If I want to sell that stock I sell to another person at my asking price through a broker. From the moment I own that stock after the IPO, the company has nothing to gain directly. Then why do companies say they have an “obligation to their shareholders”? Shareholders do have some say in how the company is run through shareholder meetings, but usually never a majority since that right is usually reserved for the majority owner of the company, which in most cases is the CEO or another Executive Officer.
So when company leaders say that they have an “obligation to their shareholders”, keep in mind that they are really talking about themselves.
