No. of Recommendations: 11
This article has a lot of significant new information for me. The impact is Macroeconomic because it influences how many successful entrepreneurial companies list themselves on stock markets and how many choose alternate routes to rewarding the founders.
The author suggests changing the onerous, counterproductive system of governance of public corporations which was mostly established in the 1970s. The author wants to keep critical decisions in the hands of those who know the business rather than outside directors as in the current system of rules. Obviously that’s not going to happen.
As investors, we need to know that many of the most promising innovative companies will never be offered publicly. Many will sell themselves to larger competitors which will often kill the innovation. Others will sell themselves to private equity which will strip and often destroy the company.
https://www.nytimes.com/2025/09/15/opinion/stock-m...
The Quiet Force Imperiling Our Booming Stock Market
By Bryce C. Tingle, The New York Times, Sept. 15, 2025
There is a puzzling contradiction at the heart of America’s economy. Investors are sinking more and more money into the stock market. Indexes are reaching record highs. But a growing number of American companies are refusing to participate in public markets at all.
Over the past 30 years, the number of companies that sell shares on markets such as the New York Stock Exchange and Nasdaq has fallen by roughly 50 percent….
The impact can be felt in every corner of our economy. The decline of our public markets goes hand in hand with the meteoric rise of private equity, which too often weakens companies and leaves them less committed to their employees, customers, suppliers, lenders and communities. Most everyday investors can no longer buy into some of the country’s fastest-growing businesses. The stock market’s impressive performance, on which so many retirements depend, is growing increasingly tenuous, as its returns rely on an increasingly narrow slice of the economy. Innovation is declining. Economic concentration is increasing….
In the past five years, private equity has grown seven times as large and now manages over $3 trillion in assets. There are now globally 25 times as many companies owned by private equity and venture capital firms as exist in the public markets….
The origins of our changes to public markets lie in the febrile atmosphere of the 1970s…The trend in the growth of the rules that govern the management of public companies almost perfectly matches the decline in initial public offerings in America….hundreds of empirical studies found that these changes have been ineffective and occasionally counterproductive….[end quote]
The point of the article is that the original set of rules had long-term unintended consequences. Even if the author is right that change is needed I’m skeptical that a new batch of minestrone soup would taste any better than the old. Steering the immense battleship of corporate America in a different direction would be so open to corruption and manipulation that it might be worse than the current system and would surely cause disruption in the markets.
Recently, TPTB have suggested new rules allowing individual investors to buy into private equity firms in their 401(k)s. The WSJ writer Jason Zweig has written articles about the mispricing and illiquidity of these private equity shares that make them dangerous and inappropriate for individuals.
Unfortunately, the system as it exists crushes innovation which is the foundation of American productivity growth. As investors we can only wish it was not so.
Wendy
