Global HR Glossary

What is an Owned Entity? 

An owned entity refers to a company or business that is wholly or partially owned by another corporation, often referred to as the parent company. Ownership can range from a minority stake to full control, and these entities can operate in the same industry as the parent company or in related fields, providing strategic benefits such as vertical integration or diversification.

Structure and Management of Owned Entities 

Owned entities are often established as subsidiaries, joint ventures, or affiliates, depending on the degree of control and the nature of the relationship with the parent company:

• Subsidiaries: A company whose majority share or entire equity is held by another company, giving the parent company control over its operations.

• Joint Ventures: Formed through the partnership between two or more companies, where each holds equity but none has full control.

• Affiliates: Companies that are less than 50% owned by the parent company but where the parent still holds significant influence.

Strategic Advantages of Owning Entities 

Owning multiple entities allows a parent company to:

• Expand Market Reach: Access new markets and customer bases without the need for ground-up development.

• Diversify Risks: Spread business risks across various markets and product lines.

• Enhance Resource Allocation: Optimize the use of resources across the group for more significant efficiency and profitability.

Governance and Challenges 

Effective governance of owned entities involves:

• Strategic Alignment: Ensuring that the entity’s strategy aligns with the parent company’s overall business objectives.

• Regulatory Compliance: Navigating differing regulatory environments, particularly in cases of international subsidiaries.

• Performance Monitoring: Regular review of financial and operational performance against set benchmarks.

Implications of Ownership 

Ownership of an entity implies responsibility not only for capital investment but also for integration into the parent company's operational standards, ethical practices, and corporate culture. This integration is crucial for maintaining a unified corporate identity and achieving synergistic benefits.