Even though you don't directly get to manage the company with your stocks, you can, if your stock has voting rights, vote for those directors who do. These are the people that typically hire upper management, which hires lower management, which hires subordinate employees. Thus, as an owner of common stock, you do get somewhat of a say in controlling the shape and direction of the company even though this say isn't a direct control.

Misconception 2: I get a discount
Another misconception is that ownership in a company translates into discounts. Now, there are definitely some exceptions to the rule. Berkshire Hathaway, for example, has an annual gathering for its shareholders where they can buy goods at a discount from Berkshire Hathaway's held companies. Typically, however, the only thing you get with the ownership rights of a stock is the ability to participate in the company's profitability.

Are you asking yourself why it would hurt for you to get a discount? Well, this answer can get a little complicated. After some thought, you probably would not want that discount. Let's look an example of Ben's Chicken restaurant (owned by Ben and a couple of his friends) and Cory's Brewing Company (owned by millions of different shareholders). Because only a few people own Ben's Chicken Restaurant, the discount would only be a small portion of the restaurant's income and revenue, which the owners would bear. For Cory's Brewing Company, the loss in income and revenue would also be borne by the owners (the millions of shareholders), but, because revenue is the main driver of stock price and the loss from a discount would mean a drop in stock price, the loss from a discount would be more substantial for Cory's Brewing. So, even though an owner of stock may have saved on a purchase of the company's goods, he or she would lose on the investment in the company's stock. Thus, the discount isn't nearly as good as it initially sounds.

Misconception 3: I own the chair, the desk, the pens, the property, etc…
As an investor in a company, you own a portion of the company (no matter how small that portion is); however, this doesn't mean that you own property of the company. Let's go back to Ben's Chicken Restaurant and Cory's Brewing Company. Quite often, companies will have loans to pay for property, equipment, inventories, and other things needed for operations. Ben's Chicken Restaurant received a loan from a local bank under certain conditions whereby the equipment and property are used as collateral. For a large company like Cory's Brewing Company, the loans come in many different forms: through a bank or from investors by means of different bond issues. In either case, the owners must pay back the debtors before getting any money back.

For both companies, the debtors, who are the bank and the bond holders (in the case of Cory's Brewing Company), have the initial rights to the property, but the debtors typically won't ask for their money back while the companies are profitable and show good capacity to repay the money. However, if either of the companies becomes insolvent, the debtors are first in line to the assets of the company. Only the money left over from the sale of the company assets is distributed out to the stock holders.

Conclusion
Hopefully we've been able to dispel any misconceptions that some stock holders have about the powers of ownership. So, next time you think about taking your stock certificate into the nearest McDonalds to get a discount on a Happy Meal, fire the employee after they refuse to give it to you, and finally walk out in disgust with a McFlurry machine, you should remind yourself of this article.

Cheers,

The Investing Guys
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