The Divorce Of Ownership And Control

Question 1

What is divorce of ownership and control

Answer 1

When the owners of a business don’t control the day to day decisions
- common in PLCs (managers hold small % of shares)

Question 2

What is the problem

Answer 2

• board of directors look to serve their own interests not shareholders
• risk of misalignment

Question 3

What is needed to solve divorce of ownership and control

Answer 3

• robust corp governance put into place

• rules need to be put in place
• transparency of info (publish financial info)
• using financial incentives to align management with shareholders e.g. bonus