How can the board maintain control of the firm while having only 20 per cent of the
Question:
How can the board maintain control of the firm while having only 20 per cent of the shares? (20 marks)
As the financial manager of an unlisted manufacturing company based in Amsterdam, you have been tasked with preparing your firm for potential listing on Euronext. The company is closely held with only five shareholders, each holding 20 per cent of the company’s shares. The shareholders are all directors of the firm and they make up the board of directors. Because of the company’s ownership structure, there has been no real consideration of corporate governance issues before. The share listing will result in the total directors’ cash ownership falling to 20 per cent of the total firm. This means that 80 per cent will be owned by external shareholders (mainly banks and financial institutions). However, the five directors have informed you that they do not wish to relinquish control of the firm.
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