Divorce Between Ownership and Control
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4 Terms
What is the divorce between ownership and control?
The divorce between ownership and control happens when the owners of a business do not control the day-to-day decisions made in the business
What is the most common example of divorce between ownership and control?
The majority of shareholders in public companies are not involved in operational decision-making by the companies in which they have invested
What is the difference between control and ownership?
Control: Board of Directors
Ownership: Shareholders
How would you handle issues?
Ensure that financial rewards and incentives offered to managers are aligned with shareholder interests- e.g. based on the share price, dividends and profits achieved
Implement suitable corporate governance procedures to ensure shareholders are protected as far as possible (e.g.through non- executive directors, management remuneration committee)
Company legislation ensuring that Directors are accountable for their actions to shareholders
