Megasubsidiaries: The Effect of Corporate Structure on Corporate Control

Professor Eisenberg describes the recent growth of massive subsidiary corporations and the legal and economic reasons behind this develonnent.He then points out the subversion of shareholder voting rights that can occur if some of the major transactions of these subsidiaries need be approved only by the board of directors of the parent.His conclusion is that the right to vote the subsidiary's stock in these transactions either inheres in the parent and is exercisable by the body of the parent's shareholders or passes through the parent directly to the parent's shareholders.T has long been observed that most of this country's business assets are held by corporations, so that ultimate ownership is once removed from the assets themselves.'Within the last few years, however, the process has gone one step further.Due to a number of recent legal and economic developments, a significant portion of the country's business assets is now held, not only by corporations, but by massive subsidiary corporationsmegasubsidiaries.As a result, ultimate ownership of business assets is often not only once but twice or more removed from the assets themselves.The purpose of this article is to explore this development and its implications for corporate law. I. GROWTH OF THE MEGASUBSIDIARY PHENOMENON A. Wholly Owned MegasubsidiariesIn terms of a corporate law analysis, megasubsidiaries may t