Economist Says: Private Ownership is Better
Another voice has weighed in on the advantages of private ownership of companies. Distinguished economist Dr. Donald Ratajczak, director of Georgia State University’s Economic Forecasting Center recently wrote in his regular column in the Atlanta Journal and Constitution (Sept. 22, 1996), “the case can be made that privately owned companies use resources better than publicly owned ones.” The advantages according to Ratajczak:
“Direct ownership involvement in running a private company . . tends to increase the long-term value of a company.”
“Sometimes . . . public companies care about bigness. . . . Thus, ill-conceived growth strategies or acquisitions could cloud the judgment of the public company manager.”
“Reports and shareholder meetings cost money and time but concerns about stock values sometimes lead to financial decisions on leveraging and stock buy backs that would not be made by a private owner.”
Two important values of a privately owned company are long-term objectives that can more clearly drive company strategy and absence of efforts to hold up stock values through financial activity.
Down sides of being private: Financing is more difficult, and therefore it may be harder to take advantage of opportunities; undiversified owners face more risk; succession planning is more critical to company continuity; and determining actual company value becomes more dificult.
Articles purchased or downloaded from Family Business Consulting Group® are designed to provide general information and are not intended to provide specific legal, accounting, tax or other professional advice. Since your individual situation may present special circumstances or complexities not addressed in this article and laws and regulations may change, you should consult your professional advisors for assistance with respect to any matter discussed in this article. Family Business Consulting Group®, its editors and contributors shall have no responsibility for any actions or inactions made in reliance upon information contained in this article. Articles are based on experience on real family businesses. However, names and other identifying characteristics may be changed to protect privacy.
The copyright on this article is held by Family Business Consulting Group®. All rights reserved.
Articles may be available for reprint with permission. To learn more about using articles for your publication, contact firstname.lastname@example.org.