A publicly traded company has a duty to protect its shareholders, a duty that potentially has legal ramifications if not met. Any executive of a public company ought to be spending ample time considering how their corporate strategy takes care of the investors that make their existence possible. Shareholders play a large part in a public company's success, so it's important to make sure they are thoroughly protected. Here are some key ways a public company can protect its shareholders.

Employing a Transfer Agent Service

Managing corporate assets can be complicated and challenging, and a transfer agent service can often be helpful in dealing with the minutia of processing securities. A transfer agent service can aid in some of the following ways:

  • Handling the payment and distribution of interest and dividends to shareholders
  • Taking care of the recordkeeping associated with shareholders
  • Assisting with the process of proxy voting
  • Issuing new stock and canceling old shares
  • Updating shareholder records when stock is bought or sold

Enhancing Shareholder Value

Most obviously, a company has an obligation to deliver a positive return on investment for its shareholders. This can be accomplished in several ways, or a company can employ all of the following ways in unison.

First, increasing the value of each share due to growth and expansion will benefit all shareholders. Paying dividends is another way of financially rewarding shareholders. A company can also participate in stock buybacks, which have the effect of raising the value of the remaining shares.

Creating a Robust Corporate Infrastructure

Corporate governance is key to making sure that shareholders are protected. A board of directors, a group of informed businesspeople elected by shareholders, can provide a strong voice in steering the direction of the company and ensuring that shareholder needs are at the forefront of major decisions. Shareholders should have the right to remove directors they decide aren't suitable any longer. A board of directors can also include an independent director, someone not associated with the company who can provide an objective point of view.

Hostile takeovers are often not in the best interests of shareholders, and a company may choose to implement strategies against the possibility of a hostile takeover. Differential voting rights and "Poison Pill" provisions are among the ways that a company can make itself an unattractive hostile takeover target.

Complying with Regulations

A lack of regulatory compliance is one of the surest ways to endanger shareholders, and any responsible company ought to go to great lengths to comply with all relevant regulations. Regulatory bodies take numerous steps to try to protect shareholders from fraud or loss, and even a company not engaged in illicit practices should take care to follow the established guidelines.

Regulatory bodies like the SEC mandate transparency and relevant disclosure by companies to shareholders, as well as educational material aimed at informing investors about their rights and some of the industry's best practices. These regulators can also act as intermediaries for investors in the event of a conflict or dispute. A public company should devote significant resources to making sure that they are on the right side of corporate regulations.