Ownership and Control

Ownership refers to the right of shareholders to the residual revenues or profits of a publicly held corporation. Shareholders “own” a corporation [Page 2575]in the sense that, as residual claimants, they receive the residual revenues or profits of corporate activity, as well as bear the residual risks. Control of a corporation is exercised by the individuals who make the major decisions that produce the residual revenues or profits that affect the wealth of shareholders. There is little problematic about a corporation in which the same group of individuals has both ownership and control since it thereby receives the profits of corporate activity and also makes the major profit-creating decisions. These two roles in a corporation assume importance mainly when there is a separation of ownership ...