Controlling and Minority Shareholder Relationships
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Ownership structure is one of the main dimensions of corporate governance. For firms with controlling shareholders, separation of ownership and control generates a two-level agency problem: between controlling shareholders and management and between minority shareholders and controlling shareholders. The interests of controlling and minority shareholders are often not aligned.
For example, if a company has two classes of common shares (dual classes of common equity):
The management team and the board are more likely to focus on the interests of Class A shareholders. The rights of Class B shareholders may suffer as a consequence of the ownership structure.
Minority shareholders have less influence on the board composition than controlling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder.