1. Controlled Companies Generally Underperform and Boards Less Diverse, New Study Finds

    Controlled Companies Generally Underperform and Boards Less Diverse, New Study Finds

    Controlled companies generally underperformed non-controlled firms over all periods reviewed in terms of total shareholder returns, revenue growth, and return on equity, according to a new study. The study also finds that average chief executive (CEO) pay is significantly higher at controlled ...

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    1. While the findings are directional conclusions and there are exceptions, the results challenge claims by advocates of controlled firms that such structures ultimately benefit all shareholders by insulating management from market pressures.
    2. But the real issue is that when such behavior does occur, external shareowners have little recourse, particularly at controlled companies that feature multi-class governance. The upshot for outside investors in controlled companies is to understand both the structures of the company and the motivation and history of the controlling owner.
    3. Given the diminished pervasiveness of poison pills and other traditional defenses for corporate control, unequal voting rights have been transformed from a seldom-seen defense to one of the most effective ways to cement control.
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