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The endangered public company The big engine that couldn't Public companies have had a difficult decade, battered by scandals, tied up by regulations...

Can the endangered public company survive? Should it survive

Evaluate the challenges that for-profit public companies face from recurrent scandals, political attacks and alternative corporate structures such as the B-corp. Can public companies survive? Should they survive?

Use the Special Report from The Economist as a starting point. Draw on additional sources as appropriate.


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The endangered public company The big engine that couldn’t Public companies have had a difficult decade, battered by scandals, tied up by regulations and challenged by alternative corporate forms May 19th 2012 | from the print edition PUBLIC companies have been the locomotives of capitalism since they were invented in the mid-19th century. They have installed themselves at the heart of the world’s largest economy, the United States. In the 1990s they looked as if they would spread round the world, shunting aside older forms of corporate organisation such as partnerships, and newer rivals such as state- owned enterprises (SOEs). China’s former president, Jiang Zemin, described NASDAQ as “the crown jewel of all that is great about America”. Russia rejected five-year plans in favour of stockmarket listings and Wall Street banks abandoned cosy partnerships in favour of public equity: Goldman Sachs, the last big holdout, went public as the decade came to an end.
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The Endangered Public Company, The Economist, 19-May-2012 2 Related topics Private equity Google Mark Zuckerberg Facebook Asia Public companies triumphed because they provided three things that make for durable success: limited liability, which encourages the public to invest, professional management, which boosts productivity, and “corporate personhood”, which means businesses can survive the removal of a founder. In 1997 the number of American companies reached an all-time high of 7,888 (see chart 1). Even now, American listed companies are as profitable as than they have been for 60 years. But during the past decade, the title of a 1989 essay, “Eclipse of the Public Corporation”, by Michael Jensen of Harvard Business School, has turned out to be prescient. In 2001-02 some of America’s most prominent public companies imploded. They included Enron, Tyco, WorldCom and Global Crossing, which, before their demise, were admired. Six years later Lehman Brothers collapsed and Citigroup and General Motors turned to the government for salvation. Meanwhile, SOEs were growing in emerging markets, challenging the idea that public companies are the biggest fishes in the sea. Private-equity firms flourished in the West, challenging the idea that public companies are the best managed. And the rise of the Asian economies, with their legions of family-owned conglomerates, challenged the idea that they are best equipped to advance capitalism’s geographical frontier. So, even though public companies are flush with cash (American firms are sitting on $2.23 trillion, see Free Exchange ) and even though the world’s most talked-about entrepreneur, Facebook’s Mark Zuckerberg, is due to take his company public on May 18th, the signs of health are misleading. Public companies are in danger of becoming like a fading London club. Their
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