Ownership vs Control

The recent news of succession planning at 21st Century Fox brings an interesting issue to light.

On Thursday, the Guardian reported that James Murdoch will succeed Rupert Murdoch as CEO at 21st Century Fox.  At the same time, Rupert and Lachlan will become executive co-chairmen.

The interesting thing about the Murdoch family’s control of Fox is that it relies on a dual-voting structure in which the family has nearly 40% of the voting power but only owns about 12% of the shares.

This may infuriate some people, but the interesting lesson here for all of us is that “control is more important than ownership”.

This is an incredibly powerful insight that can be used by business owners who are looking to grow their business.

Giving up equity in a company or a subsidiary in order to gain key talent or much needed financial backing is worthwhile so long as it doesn’t result in loss of control.

This concept is used by Richard Branson to expand into new markets.

Virgin will, as I understand it, typically provide its brand name and a small fraction of the financial capital required for an investment, but at the same time gain most of the shares in the new venture, thereby retaining control.

Ownership versus control; it’s a valuable distinction for all of us to be aware of.

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