Customer Acquisition – Meaning and its Process
Customer acquisition is the process of acquiring new customers for business or converting existing prospect into new customers. The importance of customer acquisition varies according to the specific business situation of an organization. This process is specifically concerned with issues like acquiring customers at less cost, acquiring as many customers as possible, acquiring customers who […]
Report Preparation – Characteristics of a Good Report
The market research is normally outsourced to third party agencies by organizations and in turn they create a professional report to the organization. These reports are preferably provided to senior officials who are the critical decision makers of the organization. Hence these reports need to be exclusively efficient and well formatted and the matter should […]
Buying Behaviour Patterns of Customers
For understanding the buying behaviour of the customers in retail stores it is very important to analyze the customer psychology, the factors which influence a customer for buying certain products/services from the stores and also an analysis of the customer’s response towards a sales promotion is very critical. Before analyzing the customer’s buying behaviour, let […]
Managing Brands Over Time
The markets in which companies operate are highly dynamic in nature. There is constant evolution in products, introduction of new technology, government rules, regulatory framework, consumer taste and preference. Between all this, companies have to devise marketing communication and branding programs, which look forward to maintaining consumer based brand equity. For example, consumer promotion activity […]
Functions of a Good Product Manager
Astute product management requires the product manager’s involvement at every phase of the product lifecycle. Starting with the initial conceptualization and coordination with the different departments, including liaising with finance, legal and other teams, and finally, driving the product to launch and after sales service by interacting with the sales and marketing functions. To take […]
In previous articles, we discussed the roles and responsibilities of the shareholders. In this article, we look at the distinction between shareholder ownership and control and illuminate how this comparison plays out in the corporate world. To start with, many public limited companies have a large body of shareholders who have invested in the company and contributed to the setting up of the company and running it.
However, shareholder ownership does not imply control since the company law makes it clear that only a majority percentage of the shareholders can exercise control.
The point here is that to have effective say over the running of the company, a majority vote of the shareholders is necessary following the democratic norms of participation that govern companies.
Hence, for all purposes, it is clear that whenever and wherever shareholders gather the necessary majority of votes, they would also have control over the company.
Theoretically, shareholders own the company and hence the company ought to be run according to the dictates of the shareholders. However, in practice, there would be significant differences of opinion among shareholders and this leads to a situation where arriving at a consensus is not possible. Hence, the provision that there needs to be a majority percentage of the shareholders to have effective control or say in the decision making of the companies has been established. This is also the case with any decision that is taken by the board of directors and the shareholders as control is in the hands of those who can drum up the required numbers of votes. This is the crucial distinction between shareholder ownership and control that is practiced in the real world.
However, this is not to say that shareholder control always needs a majority of votes. For instance, there can be cases where many shareholders cede their access to other shareholders who can then act on their behalf. Further, institutional shareholders represent voting blocs who can have a greater say in running of the companies than the minority shareholders. It is these differences that are at the heart of the debate over shareholder ownership and control which determine the nature of control that is exercised in the corporate world.
The point here is that shareholders are the owners of the company and hence, they have a right to control the company. However, as in any democracy, they need to have the numbers on their side to have a say in the running of the company.
Finally, in recent years, there has been an upsurge of shareholder activism mainly due to the fact that many corporate scandals have emerged leading to unease among the shareholders. So, it is indeed the case that shareholder control is necessary to prevent the management and the board from taking decisions unilaterally that are not in the best interests of the shareholders. In conclusion, it is the case that shareholders be vigilant and are the custodians of their own interests rather than being passive and let the board or management decide on their behalf.
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