James An (Stanford Law School) has posted Dimensions of Private Benefits of Control on SSRN. Here is the abstract:
The term “private benefits of control” refers to the privileges and advantages that accrue to the controlling shareholders of corporations at the exclusion of minority shareholders. Analyzing these private benefits helps scholars understand how control affects the parties to the corporate contract and how to better mitigate the negative consequences that result when ownership and control are separated.
Extant explorations of private benefits of control surmise that certain industries naturally have potential for substantial production of private benefits and predict that firms in such industries should find themselves owned by controlling shareholders. For instance, past works have hypothesized that media and sports are among these industries and that we should therefore expect broadcasters and baseball teams to be in the hands of controlling shareholders.
However, as this Article shows, many of the largest American media companies had dispersed ownership until the late 1980s. Likewise, current analyses do not explain why only some sports leagues are dominated by teams with controlling shareholders, while other leagues contain many widely held teams.
This Article explores how examining additional facets of private benefits of control can explain these and other patterns of ownership and control. This Article introduces the degree to which a benefit is rivalrous, and the degree to which a benefit is divisible as important factors in explaining patterns of control. This Article also argues that control patterns depend significantly on the degree to which a private benefit of control is separable, or distinct, from control itself—both in terms of whether control invariably confers the benefit and whether the benefit is available via other means. This Article also more closely analyzes the externalities imposed on non-corporate constituents by private benefits and the effects of external conditions, such as the legal environment, on private benefits. By looking at private benefits of control through these lenses, we can better reconcile our theories with empirically observed patterns of ownership and craft improved policy responses.
Highly recommended.
