A shareholder list is a list that shows the names of all individuals or entities holding shares in a corporation. Kind of. As this case will explain, the process of keeping such a list became unwieldy, so now a shareholder list reflects the "holders of record" rather than the beneficial owners. A holder of record is the person whose name is listed on the corporation's shareholder list. This is sometimes referred to as holding the shares in street name. A beneficial owner is the person who has the benefits of ownership to the shares. In a public company, the beneficial owner is rarely a holder of record.

Cast of Characters

• John Chevedden, a shareholder submitting a shareholder proposal to Apache Corp.
• Apache Corp., a company that doesn't want John Chevedden telling it how to live its life
• Ram Trust Services (RTS), a financial services company. Apache says it's an investment advisor; Chevedden says it's just a custodian that's holding his shares for him.
• Northern Trust Company (Northern Trust), a financial services firm that holds Apache shares for RTS.
• Depository Trust Company (DTC), a financial services firm that holds shares for Northern Trust.

As this case explains, almost no one owns shares directly in a public corporation. Instead, most public shares are held by a single company, DTC. DTC isn't the beneficial owner of the shares; it doesn't get the dividends or anything. DTC just holds the shares for others and keeps a spreadsheet of who they belong to.

The reason for this goes back to share certificates. It used to be that when you sold shares you'd have to deliver a physical certificate to the buyer. On a typical day, 30 million shares of Amazon trade hands. You can imagine how difficult it would be to deliver 30 million share certificates every day. And that's one day for one company. So instead we store all the shares in DTC's vault, and DTC keeps a spreadsheet noting who has a claim to them.

Northern Trust was on DTC's spreadsheet. Northern Trust also isn't the beneficial owner of the shares. Like DTC, Northern Trust holds the shares on behalf of others and keeps a spreadsheet of who they belong to. RTS was on Northern Trust's spreadsheet. It won't surprise you to learn that RTS isn't the beneficial owner either. RTS holds these shares for John Chevedden.

John Chevedden is the beneficial owner of the shares.

In this case, Chevedden wants to bring a shareholder proposal. But you can only bring a shareholder proposal if you're a shareholder. This case is about whether John proved he is the beneficial owner to Apache shares. Apache says he didn't. With this long chain of custody, you can see why.