November 13, 2020

Public Company Capitalism And Its Swamp Creatures

A couple noteworthy things about a story in yesterday’s Wall Street Journal...

First, there's the difference between the headlines of two versions of the story:

The headline in the easily-tweeted online version is pretty bland, compared to the print version, which is intended to go no further than the end table next to the overstuffed chair in the oak paneled gentlemens’ club.

The online headline hides the message, while the one intended for the old boys’ club tells it like it is: “This damned vaccine may save lives, but look what it’s gonna do to the share price of my Amalgamated Toys Corporation!”

Second… hey, do we really need to spell it out? I mean, really, is this where capitalism’s values reside: deep in the greed gutter?

The answer is that it’s where public company capitalism’s values reside. By law!

A little legal background here. There are three forms of law: common law, statutory law, and regulatory or administrative law. Lawyers will exclaim “I object!” to the characterization of the third as a form of law, but I’m not a lawyer so I can get away with it :) Besides, it’s true.

If the SEC, a regulatory body, agrees with a famous economist who claims that the only responsibility of a public company’s management is to support the price of its shareholders’ stock, then management better act solely to support the price of a share of its stock. We’ll have none of this altruistic stuff about stakeholders, the public, customers’ health, fairness, the truth, blah blah, etc.

So… exactly what law compels this? Is there a statute?

No, there is no statute.

But now let’s shift to common law, which is where you’ll find the slimy dens infested with public company ambulance chaser lawyer-lizards. It’s also where you’ll find the real reason for the values void in public company management.

If you’re the CEO of a public company you had better fear these reptiles and toe the line with that SEC-endorsed economist’s suggestion. If you show some common sense about values other than stock values, they’ll crawl out of the mud, quickly sue the pants off you, trash your reputation, and return to their meal of grubs au gratin.

The Wall Street Journal reflects those values for the most obvious of reasons. It’s right there in the name of the paper: Wall Street is about public companies. Only public companies. Wall Street has nothing to do with private companies, whose management is fairly free to act on whatever values and principles form the basis of their corporate culture. There are lots of big private companies and big coops, but you won’t read about them in the Journal.

Not saying that private companies are populated with angels, but at least they don’t get their values dictated to them by muculent creatures crawling out of a greed-infested swamp.

If I ever suggest an IPO for any of my companies, just euthanize me.

Unless things change, that is.