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An empirical research study conducted in the United States and published by Berle
and Means in 1932 highlighted amongst others, that shareholders‟ control over
companies had weakened. 17 The study questioned the traditional logic of property;
whether owners who had surrendered control to managers were entitled to the same
benefits as owners who fully controlled their wealth. The findings indicated the
concentration of economic power, i.e. economic activities, were mostly carried out
by large enterprises resulting in a wide spread of stock ownership. As ownership
becomes widely dispersed, the ownership of wealth and control lies less and less in
the same hands. The ownership of wealth lies in the hands of shareholders who
invest their money (wealth) in the company, while control is in the hands of the
management who makes decisions on how this wealth should be managed.
In the research, Berle and Means divided control of companies into five categories
ranging from total control through complete ownership which is usual in the family-
controlled private companies, to the total management control due to widely
scattered shareholdings so that none holds a minority control. 18 In between these two
types of control in the management, there are majority control which deals with
individual/small groups/companies who own a majority of shares in the
corporation, 19 a control through legal device without a majority ownership 20 and a
minority control. 21
17 Adolf A Berle and Gardiner C. Means The Modern Corporation and Private Property (The
Macmillan Company, New York, 1932); Adolf A Berle and Gardiner C. Means The Modern
Corporation and Private Property (Revised ed., Harcourt, Brace & World, 1968).
18 Ibid, at 67-84.
19 Berle and Means regarded it as the first indication of separation of ownership and control. Most
matters require a simple majority (51%) of votes to decide although some matters, such as alteration
of the company‟s constitution, require a special resolution (75%) of votes. Hence, the majority
shareholders will have no difficulty in voting in favour of their interests. See ibid, at 67-68.
20
This type of control by using legal devices such as pyramiding, non-voting stock and voting trust
are more suitable to the US systems than to the British Commonwealth.
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20 It involves the usage of
various methods to gain control in the company without having to own a majority of shares in it.
Pyramiding is the majority shareholders in a corporation who own a majority of shares in another
corporation and this process is repeated for a few times. This system gives the authority to the