What do these companies have in common?
- Kaiser Permanente.
- State Farm.
According to Fortune, they are among the 25 most important private companies. Publicly traded companies are great. They will always have their place. Nevertheless, a trend is afoot of increasing numbers of companies choosing to remain private or switching to private ownership from being publicly traded as Geoff Colvin describes (“Private Desires”, June 1, 2016, pp. 52–57):
“American business is increasingly shunning the traditional marker of making it—being publicly traded—in favor of private ownership. While the total number of U.S. companies continues to grow, the number that are traded on stock exchanges has plunged 45% since peaking 20 years ago.” (p. 53)
Certain advantages arise when a company chooses to remain private or when a publicly traded company chooses to go private. Colvin goes on to emphasize the attractive and strategic benefits of corporate privacy:
“You know something big is happening when such high-profile public companies as Dell and Safeway go private. They rave about their newfound ability to invest for the long term and focus on the business rather than on Wall Street, but the truth is that both were motivated in large part by that modern scourge of public companies, the activist investor.”
Being able to concentrate resources on the business itself is a great efficiency and effectiveness enhancer. Simultaneously, much energy can be preserved by not having to be constantly addressing the whims and woos of the public or other investors.
Obviously, private companies should still be extremely attentive to the public’s feedback. A private company should have just as much of a commitment as a public company to producing a stellar customer experience, maintaining good public relations, and doing business ethically. I think that the private company can be the leaner, meaner machine to reach those objectives. And there’s a whole lot of private companies that feel the same way.