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Are You a Shareowner or a Shareholder?
By Holly Testa, Director, Shareowner Engagement

By Holly Testa AIF®

"Shareowner" and "shareholder" are commonly used interchangeably to describe investors who own stock. But often, shareowners and shareholders are very different. At First Affirmative, we are proud to be shareowners.

Intention separates “owners” from “holders.” Stock ownership can range from a long-term commitment to a fleeting fling—which might be just seconds long and determined by a computer algorithm.

Shareowners buy and sell stakes in operating businesses—their assets, earnings, dividends, and capital appreciation stream. Short-term price fluctuations are not a priority; the focus is on long-term value creation.

Shareholders, on the other hand, are often not particularly interested in owning the company—just its shares. They seek to profit from predicting price moves. Long-term performance is not a priority; the focus is on short-term fluctuations in share price.

The market needs both types of investors to function efficiently. Speculators can provide an essential service: liquidity. Speculators will buy and sell available shares when long-term investors may not be interested.

However, the average holding period for stocks has plummeted—from eight years in the 1960s to about five days now. According to the New York Times, computer-driven “high frequency” trading accounts for about half of all business transacted on the nation's stock markets every day.

First Affirmative is a shareowner. We take a long-term view and accept our responsibility as a shareowner. We believe that shareowners should also strive to engage with companies on issues that affect the company’s long-term value proposition and the global communities in which we all operate.

We evaluate and vote proxies in accordance with our Proxy Voting Guidelines, engage in dialogue with select companies on environmental, social, and governance issues, and present shareholder resolutions in areas where we think the companies we own could do better.

 

Posted: April 16, 2013