B-Corp: Challenges Faced by Public Companies due to Recurrent Scandals, Political Attacks, and Alternative Corporate Structures
3/2/15 Final Paper
Evaluate the challenges that for-profit public companies face from recurrent scandals, political attacks and alternative corporate structures such as the B-corp.
“Public companies have been the locomotives of capitalism since they were invented in the mid-19th century. They have installed themselves at the heart of the world’s largest economy, the United States.”[Economist, p.1] “Public companies have shown an extraordinary resilience. They have survived the Depression, the fashion for nationalization, and the buy-out revolution of the 1980’s.”[Economist, p.8] Even though they do face some mighty large challenges ahead, they will hold strong in the near future but may eventually continue a downward trend as other types of corporations advance and become more popular; more profitable. The Economist notes that: “Public companies are in danger of becoming like a fading London club. Their membership is falling. They spend their time fussing over club rules. And, as they peer out of the window, they see the bright young things heading elsewhere.” [p.8] While noting three key problem areas, principal-agent problem, regulation, and short-termism, as the cause for the decline in the “IPO crisis” it goes in depth on how this has also coincided with a boom in other corporate life forms.
Mr. Jensen argues that public corporations “biggest drawback is what economists call the principal-agent problem: the split between the people who own the company (principals) and those who run it (agents). Agents have a nasty habit of trying to feather their own nests.” Operating companies to maximize shareholder value damages not only (ironically) most shareholders and society as a while, but also companies’ own health, believes Lynn Stout, a professor of law at Cornell University. “Companies do not invest enough, do enough research and development or pay enough attention to customers or workers – although they pay far too much to cutting costs and raising
Evaluate the challenges that for-profit public companies face from recurrent scandals, political attacks and alternative corporate structures such as the B-corp.
“Public companies have been the locomotives of capitalism since they were invented in the mid-19th century. They have installed themselves at the heart of the world’s largest economy, the United States.”[Economist, p.1] “Public companies have shown an extraordinary resilience. They have survived the Depression, the fashion for nationalization, and the buy-out revolution of the 1980’s.”[Economist, p.8] Even though they do face some mighty large challenges ahead, they will hold strong in the near future but may eventually continue a downward trend as other types of corporations advance and become more popular; more profitable. The Economist notes that: “Public companies are in danger of becoming like a fading London club. Their membership is falling. They spend their time fussing over club rules. And, as they peer out of the window, they see the bright young things heading elsewhere.” [p.8] While noting three key problem areas, principal-agent problem, regulation, and short-termism, as the cause for the decline in the “IPO crisis” it goes in depth on how this has also coincided with a boom in other corporate life forms.
Mr. Jensen argues that public corporations “biggest drawback is what economists call the principal-agent problem: the split between the people who own the company (principals) and those who run it (agents). Agents have a nasty habit of trying to feather their own nests.” Operating companies to maximize shareholder value damages not only (ironically) most shareholders and society as a while, but also companies’ own health, believes Lynn Stout, a professor of law at Cornell University. “Companies do not invest enough, do enough research and development or pay enough attention to customers or workers – although they pay far too much to cutting costs and raising