How does ownership and control differ in public limited companies?

In public limited companies, ownership is spread among shareholders, but control is often held by a board of directors.

In a public limited company (PLC), ownership is distributed among the general public who have purchased shares in the company. These shareholders are essentially the owners of the company. However, the extent of their ownership is proportional to the number of shares they hold. For instance, if a person owns 100 shares in a company that has issued 1,000 shares, they effectively own 10% of the company.

However, the day-to-day control and management of the company is not in the hands of these shareholders. Instead, it is the board of directors, appointed by the shareholders, who exercise control over the company. The board of directors is responsible for making strategic decisions, setting company policies, and overseeing the company's overall operations. They are accountable to the shareholders and are expected to act in the best interests of the company.

The distinction between ownership and control in a PLC can sometimes lead to conflicts of interest. Shareholders, as owners, are primarily interested in the company's profitability as this directly impacts their dividends and the value of their shares. On the other hand, directors may have other priorities such as expanding the business, increasing market share, or enhancing the company's reputation, which may not immediately result in increased profits.

Moreover, in large PLCs, the ownership can be so widely spread that no single shareholder has a controlling interest. This can lead to a situation where the directors have a significant degree of autonomy and can make decisions without substantial shareholder interference. This is known as the 'divorce of ownership and control'.

In summary, while shareholders in a public limited company are the owners, they do not typically have direct control over the company's operations. This control is exercised by the board of directors, who are appointed by and accountable to the shareholders. This separation of ownership and control is a defining characteristic of public limited companies.