Control

Reviewed by Sweta | Updated on Aug 27, 2020

Introduction

In business, control refers to the managerial control or functions of the management of a company or organisation. In a corporate environment, control refers to the major voting power to enable a company's major financial decisions. In small and medium enterprises, the control is exercised by a single owner or few shareholders controlling private ownership.

Understanding Control

In a corporate set-up, the power to make most regular and day-to-day decisions vests with the Board of Directors. The board consists of directors chosen by the majority shareholders of the company. The board exercises an oversight function, sets up the strategy for the business and directs the company to achieve its goals. The shareholders controlling the company may appoint a professional as a director or managing director with a small shareholding.

The board protects the financial interests of the company. In certain companies, the management is given to professional hands while the founders concentrate on their core functions of research and development. For example, Google has a home-grown professional as its CEO. The founders gave up control over the day-to-day management to the CEO.

The control of a company may change hands in certain ways, such as majority stake sale by founders or a merger with another company. Upon a change in the ownership of the company, there can be a reshuffling of the board of directors. In certain cases, there may be a hostile takeover due to a small shareholder.

In case of a change in ownership, the company's goals and policies may undergo a change. Likewise, the management may change or adapt to the new goals and policies, and frame strategies to implement.

Conclusion

The control of an organisation by its owners or founders helps to focus on the goals of the company, setting up suitable management, designing suitable verticals, and setting up hiring policies. In certain cases of listed companies, small shareholders may feel left out where the promoter holding is very high. The Company Law has provisions for the appointment of director by a small shareholder and various other provisions to protect shareholders' interests.