DEFINITION of control

Control refers to having a sufficient number of voting shares of a company to make all business decisions. Also called “corporate control”, this privileged position exists because of the support of the majority shareholder or a two-class shareholding structure, but can change by a takeover or proxy contest.


In most situations, control is in the hands of majority shareholders, who elect a board of directors to represent their interests. The board of directors is responsible for overseeing the management of the company and therefore the overall strategy and direction of the company. Council members have control, but only by virtue of majority (sometimes supermajority) the support of the shareholders, or owners, of the corporation. In some cases, a two-class structure gives control to a small cabal of founders/insiders, whose economic interest in the company may be only a fraction of the holdings of all other shareholders. A class, usually referred to as class A or class B, will have a disproportionate number of voting rights for that select group of individuals. This means that they, and not the majority of shareholders, control the company. Meta (formerly Facebook) and Alphabet are two leading companies with a dual-class shareholding structure, but they have been criticized by some for their shareholder-unfriendly corporate governance practices.

Change of control

Change of control occurs when one company is taken over by another. When a takeover bid, whether friendly or hostile, is completed, the board or majority of the board is elected by the new owner. This new or revamped board of directors is now responsible for the stewardship of the company. A militant shareholder can also force a change of control through a proxy fight. An activist investor, who believes that a company has a lot of potential to improve performance – and therefore the share price – would appoint a list of directors who he believes would serve the interests of his shareholders, and presumably those of all other shareholders. Its nominees, who constitute the majority of the Board of Directors, are put to the vote during the annual election period. If the activist is successful in his business, he will gain control of the business.

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