Technology

Going public is a way to make certain people money, I grant you that. If businesses want a loan they can apply for one or issue a bond.

In practice the problem with this is that the number of shareholders shrinks. Which means the company can focus more on short term goals since the shareholders are going to get paid either way.

Let's consider an example. I buy control over widget co. We make widgets and are turning a nice steady profit. I take the profits and instead of investing in new machines I buy back stock. My personal wealth rises. Long term the company is not investing for the future and is instead consuming itself.

Now my underlings don't like many of my ideas such as forcing the company to hire my nephew as a consultant for ten million a year. Normally they could fight my ideas and would be motivated to do so. Since if the company goes under they are unemployed. They can go over my head to the board and complain. But I am a smart guy, I made sure when I did my buyback that the entire executive class had plenty of shares. They made a fortune. I have paid for their loyalty and I am going to get it.

Everyone going along with my plan is making more and more money in personal wealth. The company is bleeding but we are all getting rich. Eventually the company is going to go bottom-up. Which is fine, because we are going to suspend operations long before that happens and pay out the major shareholders. I.e. the executives who went along with it.

This is only one scenario, and know I didn't come up with it. Read up on what happened to Sears and Toys R US or Lehman Brothers. Bankruptcy for a company doesn't mean what it means for a person. You going bankrupt means rice and ramen for dinner for a year, for them it means a golden parachute.

Try to think of this stuff as a government, it isn't the worst analogy. The more stakeholders and the more people vested in success in the government the more people are getting public programs (democracy) the less people are vested in success with less power the less the government is going to make it rain (dictatorships). The justifications are the same. People shill for dictators claiming that they are above petty squabbles and can focus on long term goals. While the history of humanity does not show this to be the case.

as then the company is no longer saddled with their primary responsibility as making money for their stockholders.

Hah! If only that were true.