From: hal@finney.org
Date: Wed Jun 07 2000 - 11:31:03 MDT
Bonnie forwards an article from Lee Flier:
> However, there are huge downsides to public companies, which are rarely
> discussed. How many times have you complained that a company you used to
> frequent and trust as a customer has suddenly begun producing lower quality
> products, or has stopped caring about customer service? How many of you
> have ever been employed by a company who used to treat workers fairly but
> bit by bit begins to expect too much work for too little pay, to downgrade
> working conditions, and to hire less and less competent new people as the
> competent ones are laid off or quit in disgust? Or has a business who once
> served your community well just up and moved somewhere else in order to cut
> corners, leaving a huge void of jobs, goods or services?
>
> All of these things are almost inevitable when a company goes public.
> Generally, the negative effects will not begin to make themselves felt until
> the corporation has been publicly held for at least 10 to 20 years, by which
> time the founders of the company may well have retired with a fat bank
> account. That is why we usually don't connect the company's going public
> with its downslide.
If it really takes 10-20 years after going public before these negative
effects appear, it is hard to be sure that these changes are in fact
due to going public. Isn't it just as likely that they are caused
by mere age? Old companies may become untrenched and inefficient, as
employees fall into ruts after decades doing the same jobs. Or perhaps
they are caused by growth. Big companies may become more bureaucratic
and less focused on the customers. Going public is just one of the steps
companies often take as they grow, it would not be the causative factor
in all the bad impacts of growth.
In general the article was full of generalities. It would be better if
the author described specific case studies in detail, naming companies
which had suffered as a result of going public. There are, after all,
obvious counter examples of companies which have thrived and satisfied
their customers despite being public - just look at the Fortune 100 or
any other list of old, established, successful companies.
Hal
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