There is an editorial you must read today. It happens to be in the Wall Street Journal. It deals with the left wing’s continued assault on corporations.
A few years ago, a shareholders rights bill was passed and signed into law. Personally, I supported the bill with some hesitation. I think that transparency is a good feature of financial markets, and public corporations ought to be disclosing some of their expenses related to salaries and capital expenditures. As a shareholder, it gives me some dollars spent vision to company strategy. Many times it is tough to decipher the real intent of a company from their annual report. Annual reports are fancy private placement memorandum’s (PPM). They are sales brochures.
Before the law, there wasn’t enough disclosure. Small investors had no chance, and large pension funds had no clarity to try and either understand the business, or to try and make a change when they felt the business was headed in the wrong strategic direction.
Post law, the left picked it up and ran with it. Now corporations are tied up in knots appeasing stupid far left policy on labor law, green energy, political donations and other strategic initiatives that have nothing to do with running the day to day operations of the business.
Corporate disclosure is another disincentive for companies to go public. Along with Sarbanes-Oxley and Dodd-Frank, the left is using existing law as a cudgel to permanently impair the capital markets. This will kill the productive capability of the United States. Follow the logic.
Dave and Jill (DJ) start a company making widgets. They go to raise capital to start it up.
The Securities and Exchange Commission (SEC) only allows accredited investors to invest in start up companies based on Internal Revenue Service (IRS) standards. That regulation limits the pool of capital available to seed stage companies. Out of the 50,000 to 60,000 companies that get started each year, only ten percent of them get seed stage money from angel investors. Of that ten percent, only around ten percent of them will make it to become an operating company. Accredited investors assume a huge amount of risk.