The Disappearing Public Corporation In The US

The number of publically listed corporations has been declining over the last decade.  In 1999 the number of US firms listed on one of the stock exchanges was relatively similar to the number of listings in other large nations.  Today the number of US listings is around half the rate of listings in comparative nations.  The decline in US publically traded firms is about equally explained by drops in initial public offerings (IPO), and by delistings as the result of mergers and acquisitions.  The decline in the number of public corporations creates some real concerns.  The three most salient concerns are discussed below.

At its peak very large public corporations employed very large numbers of well paid workers who also received health and pension benefits.  For example, AT&T employed almost one million workers; GM employed 800,000 and GE employed 400,000.  Since 2000 the new firms that went public have employed a much lower number of workers.  The median number of new jobs is 51 and most of the new listings are in low paying retail and food service firms.  There are a few exceptions like Google, but the trend is not encouraging.

Instead of solid long term employment with health and pension benefits, there are fewer jobs with health benefits, and pension plans are disappearing.  Most employers are replacing pension plans with 401k's which are optional for employees.  Unfortunately, many employees do not sign up for 401k's and most of them that do sign up are less sophisticated investors than pension fund managers.

Large publically held firms are more easily influenced by the federal government.  If a large firm in an industry is encouraged to take actions that promote public welfare other firms in the industry will follow.  The Securities and Exchange Committee also regulates publically held firms in many ways.  Firms that delist, or decide not to list on public exchanges are subject only to the state laws in which they have incorporated.  Consequently, they are less subject to government influence.

The changing nature of corporate structure plays a very important role in the operation of our economy.  It is not the kind of subject that attracts much attention from economists or from government policy makers.  The drop in corporate listings implies that the benefits from going public are lower than the costs associated with being a publically held firm.