Thursday, March 15, 2007

Are private companies moral or immoral?

With the growth of Private Equity funds, much has been written about whether or not they should be more closely regulated. The press, public, and legislators are often suspicious of privately owned companies, which are not bound by the same disclosure rules as public ones. Yet, we forget that the purpose of disclosure is primarily to protect shareholders, not simply to address the prurient curiosity of the uninvolved public.

I could argue that it is the public company which is immoral in that it is a form of ownership which takes control away from the owners and gives it to a self-perpetuating group of managers. In the case of a private company, ownership and management are more closely linked - in some the same. Owners know all that they want to - often much more than shareholders in a public company. Those who are not involved do not need to know, and certainly competitors are kept in the dark more effectively.

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