How Founders Maintain Control Of The Company

Due to the continuous financing needs,the expansion process of enterprises,especially innovative technology companies,often accompanied by the continuous dilution of founders’ shareholding.In practice,because of dilution of shareholding and having a adverse view with major shareholders,the founder was excluded from the company,which is common.And these companies suffered a plight of declined performance after the departure of the founder.In this context,the study of "how to help company founders maintain control rights at a lower shareholding ratio" has a strong practical significance.And the partner system in Alibaba Group,as a example to successfully help Ma Yun team maintain the company’s control rights,has an important enlightenment to solve this problem.It uses the case study in this paper.It firstly introduces the process of shareholding dilution and the process of maintaining control power in Ma Yun team.The core contents of the partner system are introduced in detail.Then,it analyzes the motivation of Ma Yun team,Yahoo and Softbank in supporting partner system,and explains the operation mechanism and overall operation effect of partner system.Then,it compares and analyzes between the partner system and the dual class structure.It finds that the partner system is essentially a "new" dual class structure.Compared with the dual class structure,it has the advantages that improving the stock attraction and maintaining company control rights of founder are not limited by the proportion of shares,but the core role of two is to help the founder or manager to maintain the company’s control rights at a lower proportion shares.They belong to similar control rights arrangements in essence.Finally,based on the premise that the partner system and the dual class structure belong to the same kind of control rights arrangement,it comes to the conclusion that the partner system has the advantage of avoiding the shareholders interference management team of pursing short-term interests,preventing the hostile takeover and encouraging managers to invest more human capital.At the same time,there are also disadvantages,for example,the market supervision mechanism can not play a role,increasing the possibility of seeking personal gain for partners.By the comprehensive analysis of the partner system,despite of some defects,partner system still has a great reference and strong universal applicability for the enterprises,especially for innovative technology companies.When the founders of these enterprises face the problem of losing the control rights of the company,they can combine with the characteristics of governance structure characteristics in their company to selectively take example by the partner system.Maintaining the control rights of company by innovating the internal governance mechanism of the company and to appoint with shareholders to revise the regulations of company.In addition,according to the shortcomings of the partner system,it puts forward the proposal that the voting rights of the company’s major transactions are distributed in the proportion of the shares,when the partners withdraw the mechanism.At the end of this paper,the author suggests that revising corporation law should add new detailed rules and regulations,which allow shareholders to agree on whether to give the privilege to the initiative shareholders.