It is not unusual for large American public companies to be controlled by a founder, a founding family or a corporation that bought out the large majority of shareholders at some time in the past.
In the case of all of these companies, the shareholder should not be fooled into thinking anyone other than the controlling shareholder ultimately decides who runs the company and how.
The chief executives on the “Least Powerful CEOs in America” list serve at the whim of controlling shareholders, regardless of how well or how poorly they do for the company’s other shareholders.
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Most of the companies with a controlling shareholder are ones in which the founder or founding family had all of the ownership before the company became public. In some cases these founders kept all voting shares for themselves at the time of the initial public offering. In other cases, they kept enough to still have much larger stakes than any other holders. The best example of the evolution from owning all of a company to owning voting control is Walmart (NYSE: WMT). Sam Walton founded the company. He kept the controlling block of shares when it went public. His family retained control after his death and still does.
The fact that a CEO can be dismissed for reasons other than performance does not appear to affect how well these chief executives do. Current Walmart CEO Michael Duke may be the worst chief executive in the retailer’s history, but so far he retains the support of the founder’s family.
The Mexico bribery scandal that Walmart faces will cost shareholders money, probably in the form of large legal fees and perhaps government fines. Walmart’s stock has fallen recently due to investor concerns. Duke has been a poor steward. At the other end of the spectrum is Fabrizio Freda, who runs Estee Lauder (NYSE: EL). The company set a record for both profits and revenue last year. Shares are up 100% in just two years. Still, nothing would keep the Lauder family from dismissing Freda — should they choose to — despite those successes.
24/7 Wall St. reviewed the corporate structure, governance and voting rights of the 500 largest companies by market cap. Based on a review of company proxies, we identified those companies in which someone other than the CEO had voting control of the company. We then limited the universe to those companies with market cap in excess of $5 billion.
- Title: Director, President, and Chief Executive
- Controlling Shareholder: Charles W. Ergen
- Controlling Block: 98.2% of Class B common
Charles Ergen cofounded Dish Network (NASDAQ: DISH) with his wife, Cantey Ergen, and James DeFranco, in 1980. Together they own a 98% controlling block. Joseph Clayton, who has been the company's CEO since mid-2011, is an industry veteran.
He was paid $9.8 million for the year. Clayton has been chairman of Sirius XM (NASDAQ: SIRI) and sat on the board of directors of EchoStar (NASDAQ: SATS). Like cable, satellite television was introduced in the 1980s as an alternative to major TV network programming. Dish and DirecTV (NASDAQ: DTV) have been the two successes that emerged from 30 years of company launches, failures and mergers.
The Dish subscriber count is currently just short of 14 million. The key to success in the industry has been breadth of programming. Dish has 230 basic video channels, a large number of premium sports and movie packages, and more than 3,000 local channels. Clayton appears to be the right choice to run the company at the right time.
His background in satellite delivery and content acquisition is essential to the video-program-to-the-home industry, which has become extremely crowded in the past five years. Both the large telephone companies and startups like Netflix (NASDAQ: NFLX) compete directly now with the cable and satellite incumbents.
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