DEFINITION of 'Working Control'

Working control is a situation wherein a minority shareholder or shareholders have enough voting power to influence or determine corporate policy. This exists in corporations with widely dispersed share ownership where no single individual has a majority interest, meaning ownership of 51% or more of the voting shares. An individual shareholder with a 20% stake in a company often controls a large enough position to have working control. Other times, it requires a group of shareholders working in concert to take control. 

BREAKING DOWN 'Working Control'

Working control exists when a minority shareholder or multiple minority shareholders unite to take a controlling interest in a corporation. The opportunity for minority shareholders to gain this control is exhibited in corporations where there is no dominant majority (greater than 50%) shareholder. While there are no official benchmarks for defining working control, 20% ownership is often considered large enough to exhibit this level of influence. In this case, companies must list the individual investors with working control on their financial statements. 

Working control in some industries like technology is not a common occurrence. Founders of Facebook (FB) and Google (GOOGL), for example, have sat at the helm of their respective companies since day 1. Therefore, they still control a majority of the voting shares while early investors likely lay claim to a large part of the remaining voting stake. In fact, Mark Zuckerberg controls over 80% of the voting shares in Facebook, so any matters of change or direction must be approved by him.

Where working control emerges is with companies in legacy industries that experience some turnover at the C-level or board of directors. In addition, hedge funds, mutual funds, and private equity firms often obtain working control of a stock before launching a proxy fight with the current management team. 

Pros and Cons of Working Control 

Having working control of voting shares gives the person or group massive influence over the operational and strategic decision making process. If that individual believes the company should pursue a project or withdraw from an existing one, they have the power to jumpstart those efforts on their own. In addition, it grants a person to take a leadership position on the board of directors and make key operational hires in the C-suite. But this also poses a problem for the company. When one person makes all the decisions, they may overlook or ignore good ideas in favor of their own. That can lead to poor organization decisions or inefficient allocation of capital.

RELATED TERMS
  1. Control

    Control refers to having sufficient amount of voting shares of ...
  2. Control Stock

    1. Equity shares owned by major shareholders of a publicly traded ...
  3. Detective Control

    Detective control is an accounting term that refers to a type ...
  4. Common Shareholder

    The rights of common shareholders give them the ability to influence ...
  5. Capital Control

    Capital control is an action taken by a government, central bank ...
  6. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding ...
Related Articles
  1. Personal Finance

    Controller: Career Path & Qualifications

    Find out what it takes to become a financial controller, starting with undergraduate educational requirements and moving into professional certification.
  2. Personal Finance

    Career advice: Accountant versus controller

    Learn about the differences between controllers and accountants, how the two are related and which is the best career choice for aspiring bookkeepers.
  3. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
  4. Know Your Shareholder Rights

    Common-stock owners have numerous privileges and should be vigilant in monitoring a company.
  5. Investing

    What Is Tenure Voting?

    This stockholder voting structure, one of three types, has advantages and disadvantages. Here’s a look at the pros and cons of all three.
  6. Investing

    A Peek Into Shareholder Meetings

    Shareholder meetings can be glamorous, exciting or controversial, but not particularly revelatory.
  7. Managing Wealth

    How To Become A Corporate Board Member

    We look at how corporate boards are constructed, and how investors can get involved.
  8. Small Business

    Facebook Board Prepares For Life After Zuckerberg (FB)

    The company's board of directors is wasting no time preparing for a succession plan for if CEO Mark Zuckerberg ever decides to step down.
RELATED FAQS
  1. What can shareholders vote on?

    Understand the usual voting rights of common stock shareholders, along with the importance of shareholders exercising their ... Read Answer >>
  2. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
  3. Do Shareholders Get a Say in a Firm's Operation?

    Stock ownership often provides a vote on board membership and other issues put out for shareholder approval. Read Answer >>
Hot Definitions
  1. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  2. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  3. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  4. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  5. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  6. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
Trading Center