Response to the artical - Essay Example

25 May The Challenging Transition of the Public Company Since the mid-19th century, public companies have been included in the great contenders on the array of corporate forms preferred by capitalists for various rationales. The era of 1990s has been its golden age as it established in the great America and it consequentially possesses the characteristics that capitalist and investors look for in a company. Through decades, public companies triumphed and remained resilient by providing three valuable factors namely limited liability, professional management, and corporate personhood.

All three have once convinced the capitalists on the durability and reliability of this corporate form. Yet, with all these positivity come the decline of public companies in the market leaving it behind the emerging glory of state-owned enterprises (SOEs), partnership, private-equity corporations, and family conglomerates (The Economist). This is the so called dark age of public company as thoroughly justified in an article entitled “The endangered public company, the big engine that couldn’t” (The Economist) citing various examples and dependable resources to support its premise.

As the article suggested, one of the primary causes of this decline is the limiting rules in public companies. These rules were generated by the major stockholders, mostly the founders or owners, to instigate control over corporate decision making and overall power. Centuries passed and the public company regulations evolved with the advancement of market and consumer demands. These changes mostly were the end result of economical crises such as the great depression, nationalization, and the buy-out revolution of the preceding years.

Another force that brought about this change is the emerging power of other corporate structures which is connected to the booming economy in other parts of the world apart from America (The Economist). Partnerships are patronized as they offer power for the investors and the experience of part-ownership for the company, a glamorous feel that the public company could not offer. SOEs moved further forward as the government subordinated profits to social benefits and promoted social functions.

Even with this innovation for corporate structure, SOEs still does not hold the crown of glory as it is challenges by the family-controlled businesses ascending from Asian and Indian countries. These family-owned companies encompass tight control over the empire and offer limited power for the stockholders. Most often, family members dominate the managerial position of such companies. The public companies have been extraordinarily resilient (The Economist) through decades of successes and failures.

With this descending evolution, the economists foretell that it may take ten more years before it can get to its feet and back to its track again. Indeed, innovation on corporate laws and regulations must be applied by public companies in congruence to the challenging economic situation. The author suggests the broadening of bids for initial public offerings (IPO) that previously made the public company flourish among the public investors. IPO creates not only jobs but chances for the investors to prosper and gain profitable income from proper investments.

The author also agree with the article’s idea of reapplication of old Sociétés en Commandite par Actions of France generating equity in power and control of the corporation as the major owners to be liable for decisions and debts and the ordinary stockholders to have limited power and lose only what they invested. Work Cited The Economist. “The endangered public company, the big engine that couldn’t.” (2012). Web. 24 May 2012.