With a seismic shift towards the concentration of corporate ownership in the hands of institutional investors and the private ownership of companies, corporate boards and management are facing unprecedented shareholder and societal demands. Through the Future of the Corporation Project, which draws on the world-class resources and faculty of Columbia University, the Millstein Center seeks to delineate what that future corporation should look like, proposing a new, forward-looking narrative on the purpose and governance of the corporate form.
The Project includes ongoing discrete, but related and dependent, research projects that each stand as its own line of inquiry and add to the body of knowledge in corporate law, governance and finance. Collectively, they begin to build a needed body of research that defines and reflects the evolution of the corporation and the context in which businesses function, from the social and political to the financial and economic.
The Rise of Private Markets and the Decline of Public Equity
Capital formation in the United States is currently undergoing a significant transition with largely unexplored consequences for the ownership and control of American business, as well as for the future of the public equity markets.
Although public equity markets remain vast and important, capital for business formation and growth is increasingly being raised privately from a relatively new set of institutional investors (most importantly, venture capital and private equity funds). As a result, ownership and control over American business has shifted from participants in public markets to participants in the private markets.
This Future of the Corporation sub-initiative seeks to systematically study this transition towards the private capital markets, the institutional and governance arrangements which govern the businesses funded there, and their implications for law and regulation. This initiative will unfold through a multiyear process, starting with a series of initial “round-table” discussions, with the aim of developing a comprehensive agenda for follow-on research.
February 2019 White Paper
Inaugural Roundtable and White Paper
At the inaugural roundtable on October 26, 2018, the Millstein Center convened 30 participants from academia, regulatory agencies, and private equity and venture capital firms to formulate the initial research agenda. (See the day’s agenda here.)
The Millstein Center’s February 2019 white paper, Private Ownership at a Public Crossroads: Studying the Rapidly Evolving World of Corporate Ownership, outlines the path forward following the initial round-table and identifies topics for further research.
Private Ownership at a Public Crossroads Roundtable at TPG - October 11, 2019 | San Francisco, CA
To continue this conversation, the Millstein Center will convene a roundtable at TPG Capital's offices in San Francisco to explore the following questions among a small group of academics, practitioners and regulators:
- Factors driving the public/private decision: Is it necessarily “good” or “bad” to have more public companies? Are there barriers preventing or discouraging issuers from accessing the public markets, and if so, what are they? What factors are driving whether a company stays private or goes public? Will increased regulation of the private markets change the calculus? Will (and should) innovations like the Long-Term Stock Exchange gain traction and urge more companies to go public? What about the use of dual-class shares and multi-tiered capital structures?
- Private vs. public company governance structures: How do ownership and governance structures differ between public companies and private companies? Could the private governance model lend itself to improved governance for public companies, and are there aspects of the public governance model that will inform choices for private company governance? Is there a role for regulation in making these choices?
- Changes in the structure of private equity and venture capital financing:What is different about “seed” vs. “venture funding,” and how much does such funding specialization improve efficiency and benefit investors and funding recipients? How have changes within private equity allowing for increased liquidity affected companies’ decision to stay private or go public?
Additional Rise of the Private Markets Research
Additional topics identified in the white paper, which we will continue explore as part of the Project, include:
- Tracing ownership chains in the private markets: What do the chains of ownership look like in the private company sector?
- Data access and collection:
- Produce a meta-summary of data sources that are currently available for the private markets that will be updated over time.
- Design a collaborative data network that will include input from public pension funds, private equity funds, family offices, endowments, and others.
- Regulatory and policy issues, including access and disclosure: What are the potential benefits of opening up private capital markets to retail investors? Would they outweigh the costs? Are they needed for the effective functioning of capital markets?
Other ongoing Future of the Corporation research projects include:
- The Implications for Informed Evidence Policy Making in an Era of Privatization
- Berle Means, 2020 Edition – The Effect of Ownership “Reconcentration” on Corporate Governance
- Boards 3.0 – Governance Models from Private Equity
- Competence and Conflict Costs – Control Devices in the Public Market
- Climate Risk Disclosures – Who’s Disclosing and Who Should Be?
For more on the Center's research: