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There has been a growing concern over the past few years about the basic operation of publicly held companies, those listed on the major stock exchanges and owned by the general investor community.
The complaints center on the fact that other forms of ownership seemed to perform better. Privately held companies, in particular, appear more able to plan and to take the long-term perspective.
Private-equity companies -- financial entities that own independent businesses -- seem to be especially favored, and popular accounts indicate that the smart money has been moving in their direction: Executives such as Bob Nardelli were bailing out of publicly held companies to take up positions running companies for private-equity firms, where they were paid a lot more money.
And the performance of those firms has seemed far better than anything achieved by equivalent publicly held companies.
There are several arguments behind the idea that privately held firms are more efficient.
Conservatives argue that a big source of efficiency is that they are free from many of the regulations that burden publicly held companies, such as Sarbanes-Oxley requirements. Less regulation equals greater efficiency.
Shareholder advocates argue it is harder for executives in these companies to spend money on themselves because the owners pay more attention to the business and can discipline the executives more effectively.
Private-equity firms are seen as especially effective at turning around troubled businesses because, it is argued, they have the discipline to focus on the bottom line of financial performance. The executives running them are expected to have some of their own money at stake in ownership to create the commitment to improving company performance.
Source:
http://www.hreonline.com/HRE/story.jsp?storyId=203085665
The complaints center on the fact that other forms of ownership seemed to perform better. Privately held companies, in particular, appear more able to plan and to take the long-term perspective.
Private-equity companies -- financial entities that own independent businesses -- seem to be especially favored, and popular accounts indicate that the smart money has been moving in their direction: Executives such as Bob Nardelli were bailing out of publicly held companies to take up positions running companies for private-equity firms, where they were paid a lot more money.
And the performance of those firms has seemed far better than anything achieved by equivalent publicly held companies.
There are several arguments behind the idea that privately held firms are more efficient.
Conservatives argue that a big source of efficiency is that they are free from many of the regulations that burden publicly held companies, such as Sarbanes-Oxley requirements. Less regulation equals greater efficiency.
Shareholder advocates argue it is harder for executives in these companies to spend money on themselves because the owners pay more attention to the business and can discipline the executives more effectively.
Private-equity firms are seen as especially effective at turning around troubled businesses because, it is argued, they have the discipline to focus on the bottom line of financial performance. The executives running them are expected to have some of their own money at stake in ownership to create the commitment to improving company performance.
Source:
http://www.hreonline.com/HRE/story.jsp?storyId=203085665
