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Rejecting Public Ownership
May 18, 2012
Business creators and investors are increasingly choosing not to take their companies public, says the Economist, and one reason is regulation, with its associated risks and costs:
Entrepreneurs have to wait longer—an average of ten years for companies backed by venture capital, compared with four in 1985—and must jump through more hoops. Lawyers and accountants are increasingly specialised and expensive; bankers are less willing to take them public; qualified directors are harder to find, since even “non-execs” can go to prison if they sign false accounts
Legislators and regulators be warned: The more you pile rules and penalties on public corporations, the more businessmen and investors will look for ways out from under the pile.
While one of the "business" forms rising as the public corporation declines is the state-owned enterprise, others include privately owned corporations and various forms of partnership. The Economist laments the lack of transparency and accountability in some of these models -- but for individualist capitalists, it may be worth reflecting on whether greater control of a business by its top manager, especially when that "manager" is actually the company's founder, is actually better. Why is it good for the person who has brought a business into being to sell others the right to fire him?
Hat tip to Future of Capitalism.