OWNERSHIP AND CONTROL

Separation of Ownership and Control



Separation of Ownership and Control

Introduction

There is a high level of concentration in large U.K companies, being marginally present to diffuse ownership structures. In this regard, 58.8 percent -14.1 percent with absolute control and 44.7 percent majority-control of the sample firms have a shareholder with a percentage higher than 50 percent of the property, being only 2.3 percent of the companies that have a true separation between shareholders and managers; 38.2% of these companies have shareholders with an ownership percentage above 50 percent and 36.2 percent of property is in the hands of non-financial firms (Barry, 1989, 57-77). As a control mechanism within the enterprise, the presence of a large shareholder can help mitigate this agency problem between shareholders and managers.

An organization in which it is possible to transfer title without any loss of value and where there is significant dispersion of capital among multiple shareholders, they have no incentive to control the behaviour of managers, on the contrary, the existence of a controlling shareholder with the capacity to control and fire managers can mitigate possible opportunistic behaviour (Barry, 1989, 57-77). However, this type of large shareholders raises the issue of who supervises the supervisor, i.e. the concentration of ownership is not without its drawbacks, especially when the controlling shareholder uses its influence in its own interest on the remaining minority shareholders (Barry, 1989, 57-77).

On the other hand, another important issue related to the effectiveness of the ownership structure also represents the ownership concentration, the characteristics of the owner who holds a majority of votes and their ability and incentive to take an active role in control. For example, an individual or household, or institutional investors as major shareholders have greater incentive to exercise control, thus the former have little ability to diversify their investments through other companies (Barry, 1989, 57-77). Second, meanwhile, have the capacity to control because they have economies of scale and experience in exercising its supervisory work in several companies at once, although, conversely, the greater diversification of investments by these institutional investors can also generate a loss of control to be present in several businesses at once (Aldcroft, 1964, 113-34). In this regard, in conjunction with group classes or entities exercising control, Majority of owners of the largest European companies, indicated that there are different types: institutional investors, banks financial, nonfinancial corporations, the individual owner, families or the government (Nyman, Silberston, 1978, 74-101). These authors list the main aspects of each as follows:

Institutional investors are characterized by portfolio investments and have a long term relationship with companies, their results are measured in terms of financial success and its objective is shareholder value, although its share ownership low capacity prevents them from to influence management.

The individual or family ownership is associated with the role of owner and manager of the company at a time, so it usually is characterized as risk averse, making the investments made ??are very well analyzed, in some cases, the family as the owner may seek private ...