At any given point in time, it is clear from documentation/ declaration who the owners of a business are, what portion of the business they own.
Owners usually get a portion of profit as ’dividends’. They have a say in appointing the highest level/ board of executives/ managers who run the company on their behalf.
Shares/ Equity
Public offerings
Existing owners or executives can effectively divide the company’s ownership into a certain number of shares. A common way of expanding the ownership of a company is to sell these shares to the general public at a price which is either preset or determined automatically by an auction. This process is called the initial public offering/ IPO.
Dividing profit
Companies offer a dividend to owners by proportionally dividing the annual profits. This makes ownership of the company attractive, which becomes useful when the owners decide to sell more shares to raise more money.
High dividend yield companies offer a big dividend relative to the share value - they thus constitute attractive investment.
Market capitalization
A rough way to calculate the value of a company is to measure it by multiplying the number of shares by their market price. Depending on the size of the market capitalization, companies are classified into small, medium and large capital (cap) companies.
Privileges
Shares grant varying privileges: voting rights, priority in receiving payment in the event of liquidation of assets after bankruptcy.
Succession
In many firms, a small group of people - eg: a family - owns a large fraction of the shares. Oftentimes, it was one of them (or their ancestor) who started the business, and one or more of them are actively running it.
Professional management
Sometimes the owners appoint professional managers/ CEO’s to run the company. Sometimes, they pick managers from their family. This is more common in countries where social contracts are weakly enforced, so trust outside the family is low.
Nepotism
Statistics reveal that succession involving nepotism in general results in poorer performance. This is often because the person given the responsibility of running the enterprise is not as capable of running a business as their predecessors - either due to lack of talent or due to lack of energy and drive to work hard. Also focusing on one’s family artificially removes access to top talent outside the family.
Japanese firms often rely on adoption to solve this problem.