The Impact of Going Private on Corporate Stakeholders

As capital markets in the United States increasingly go private, it is unclear how the privatization of corporate finance will affect non-shareholder stakeholders of firms, most centrally employees, communities, and the environment. Some scholars and public policy experts believe that concern for such stakeholders should not hold any relevance in the discussion of corporate law in general, and thus may be presumed to believe the same about a conversation about privatization. In such a view, these concerns lie outside the realm of corporate governance law; they therefore should be of no great moment in the debate over whether public policy should respond to the strong going private trend. But for those of us corporate law scholars who assume that corporate governance should be analyzed in part according to its impacts on a broad range of stakeholders, one cannot decide how to respond to privatization without knowing how it affects those stakeholders. In this short essay, I suggest that, at least at a level of abstraction and as a matter of theory, there is little reason to be particularly skeptical of private companies, as compared to public companies, in their treatment of stakeholder interests. Private companies may be good citizens or bad citizens, good employers or bad employers. But this will be determined by what happens in the governance and behaviors of particular companies, not by some theoretical predisposition. This essay is intended to be a brief introduction to several of the factors that weigh into the public/private comparison