Thursday, September 12, 2013

Future of Mega-Corporations Likely To Be Privately Owned - Greater Power Could Lead To Good and Bad Things For Society

There a lot of private money out there buying up companies.  Like them or not, the Koch Industries come to mind (as a fiscal conservative who looks towards the future progress, I think they're holding back the US with their dirty energy).  But I think we're seeing a trend that no one in the media is really reporting on.

Recently, Apple began buying back large chuncks of its own stock.  Dell is going private (well, it has to).  Even Blackberry is considering going private or selling to a private entity as an option.  And just today, we near that Disney will do the same.

A company buying back one's own shares on the open market is a way to boost the remaining shareholders' stock values as the value of the company remains the same but there are less shares being traded or spread around.

Eventually, a couple of decades down the line, some companies may be in a position to just buy everyone out or close to it and essentially go private even if they continue to be as successful as ever and make boat loads of money.

Companies like Apple, Google, and Microsoft generate cash in the tens of billions.  While I agree with the need to save up for rainy days for individuals and families, and I think Steve Jobs had the same mentality when he was hoarding cash for Apple.

However, like companies that do buy up companies from time to time, like GE, moving beyond its traditional business.  It got into television and financial services, individuals and families do that when they reach a certain level of financial security.  They might buy a second home or something.

Well, tech companies might not necessarily do that.  And with more than enough cash to pay for daily operations and other obligations, those extra billions are then given back to shareholders as cash dividends or share buybacks.  And share buybacks seem more popular these days.

Again, we could reach a point when many of these companies buy so much of itself back that going private becomes an option.  In fact, of the three tech giants above, I see Microsoft likely to go that route should the next CEO failed to turn things around. Much in the way Dell is doing now.  Both companies continues to be profitable.

After saying all that, comes to the point I'm trying to make and have people think about.  Could a lot of these private companies in the future then end up being huge mega-corporations amassing more wealth and power than their peers today?

Look at the Koch brothers.  Like them or not, they bring a specific agenda to the American national, state, and local politics that has influenced conservative and libertarian movements in each of the last two presidential and three midterm elections.  They've likely single-handedly hamstrung environmental policies and slowed the green revolution.  They've managed to keep the Tea Party movement going while making the GOP establishment look impotent.

On the other hand, just because we don't see a lot of more liberals in companies having this kind of influence doesn't mean the same thing won't happen on the left-leaning mega-corporations in the future.  Both sides could continue to battle it out and lead to greater influence on governments.  If you thought money in politics today is bad.  Just wait you see.  Remember what Romney said?  Corporations are people too (Huffington Post)

Furthermore, private companies may also have less regulations and disclosure rules to follow than public ones.  That is both good and bad.  But when you talk about money, greed and jealousy is almost spoken in the same breath.  It does becomes easier to make money for this reason.  At the same time, private companies can go about making steady income at stable pace without the need to answer to analysts and shareholders.

I guess I'm saying that the opportunity for private companies to become bigger and more powerful is there.  But so is the opportunity to use the new wealth and greater power for good and bad.

I think this is an issue that I like to explore more in the future.  And I'm happy to share what I know and think with you over time.  This is a social issue that matters to everyone, all 100% of us.

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