Founders and their families can raise capital without giving up control of companies through mechanisms such as dual class shares, pyramidal ownership, voting agreements, and the disproportionate representation of the board. The use of these mechanisms in publicly traded companies is widespread throughout the world and in the United States. Understanding how the various mechanisms contribute to the economic divide between ownership and control is important for people who set them up, because the choice between these mechanisms affect firm value. This is also important for the minority shareholders of these companies and regulators, because of the transparency and investor protection.
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by Belen Villalonga Source: Harvard Business School 6 pages. Publication Date: February 13, 2009. Prod. #: 209109-PDF-ENG
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