Definition
Working control refers to a stakeholder’s ownership percentage in a company that is substantial enough to manage and control its daily activities and operations. Often, this includes the power to make critical and strategic decisions for the company. It’s not necessarily majority ownership, but a significant influence over the business operations.
Phonetic
The phonetics of the keyword “Working Control” would be: Working – /ˈwɜːrkɪŋ/Control – /kənˈtroʊl/
Key Takeaways
- Understanding Importance: Working control is crucial for organizations as it helps manage resources efficiently. It serves as a guide to monitor operations and evaluate their effectiveness.
- Efficient Planning and Decision Making: It assists in planning and decision making by providing insights into the business’s operations. With proper control measures, it is easier for the management to decide on allocating resources, strategizing, and forecasting future needs.
- Risk Management : Working control plays a pivotal role in risk management. It helps in identifying potential risks early on and allows businesses to take corrective measures proactively, reducing the impact of any issues that might arise.
Importance
Working control in business finance refers to the scenario where a person or organization holds a sufficient amount of voting shares in a company, therefore having the power to influence the company’s policies, strategic direction, and overall management decisions. The importance of working control lies in the ability to set the course for the company and to ensure that it aligns with the controlling party’s business objectives and financial interests. It also offers the power to choose the company’s board of directors, thereby influencing the company’s leadership and governance. Therefore, working control is a crucial factor in determining how a company operates and evolves over time.
Explanation
Working control in a business/financial context refers to the strategic positioning that allows a person or a small group of individuals to exercise significant influence or dominate decision-making in a company. It is not always about owning a majority of total shares, but can also result from owning a significant portion of voting shares, meaning that someone could have working control even without having more than 50% ownership stake. This control mechanism can empower a shareholder or a group of shareholders to govern the operational, financial, and strategic directions of the company.The purpose of working control is to create an environment where decisions can be made quickly and efficiently. This is particularly beneficial in industries where trends and conditions can change rapidly, and decisions need to be reached quickly to capitalize on opportunities or mitigate risks. Moreover, it can also avoid deadlocks or disputes that may halt productive decision-making, especially in businesses where there exists a large number of shareholders with differing views and business philosophies. However, it is also important to note that working control can lead to abuse of power or exclusion of minority shareholders if not balanced with good corporate governance practices. Therefore, its use needs careful handling and checks to ensure fair and just operation of the entity.
Examples
1. **Ford Motor Company**: Henry Ford II, grandson of the company’s founder, is an example of working control in business. Even though he did not own the majority of the total shares, he held the majority of voting shares which gave him working control over the company’s decisions and operations. 2. **Facebook**: Mark Zuckerberg, CEO and founder of Facebook, maintains working control of his company through owning the vast majority of the company’s voting shares, despite not owning a majority stake overall. This type of working control allows him to effectively manage day-to-day operations and guide long-term strategy, positioning Facebook for market leadership.3. **Berkshire Hathaway**: Warren Buffett, the chairman and CEO of Berkshire Hathaway, owned just 37% of the company’s shares but held 66% of the voting rights, granting him working control. This control has enabled him to steer the company’s investment strategy and retain significant influence over its operations.
Frequently Asked Questions(FAQ)
What does the term Working Control mean in finance and business context?
Working Control refers to a stake in the company, usually a significant percentage of shares, that allows the shareholder to dictate policy and decision-making processes because of their authorization to vote.
Why is Working Control important in business or finance?
Working Control is vital as it directly affects the decisions for a company’s direction and strategies. The stakeholder with Working Control has the power to shape and determine the future of the business.
Who generally holds Working Control in a company?
Usually, Working Control is held by majority shareholders, founders, or a consortium of investors who collectively own a significant enough percentage of the company to wield control.
Can Working Control change hands?
Yes, Working Control can change hands through methods such as a change in share ownership, either through the sale of shares or issuing of additional shares.
How is Working Control determined?
Working Control is mainly determined by the percentage of shares owned. In a general rule, whoever owns more than 50% of a company’s shares has Working Control. However, in some cases, less than 50% can still allow Working Control if it’s significantly more than the next largest shareholder.
What’s the difference between Working Control and Absolute Control?
Working Control usually refers to having enough influence to dictate company policies. In contrast, Absolute Control refers to owning more than half of the voting shares, thus having full power over all decisions without needing agreement from any other shareholders.
Can minority shareholders ever have Working Control?
Yes, it’s possible in situations where ownership of the remaining shares is widely dispersed among a large group of shareholders. This could allow a shareholder with significantly less than 50% of shares to still exert Working Control.
Related Finance Terms
- Management Rights
- Decision-making Power
- Operating Control
- Corporate Governance
- Majority Stakeholders
Sources for More Information
