I’ve been listening to Aquired recently (podcast about company origin stories) and when talking about privately owned companies (for instance, the recently Mars Inc. episode) they always do back of napkin estimated earnings because the company is private, which apparantly means they don’t have to disclose earnings.
But in my country, Denmark, every company earning above 50.000 DKK (=7853 USD) has to disclose earnings. I believe this is for price discovery purposes, so that other entrepreneurs can see how much margin companies have and try to compete if they earn too much money, which is an important part of capitalism, right?
How come this is not required in USA, the “home” of capitalism? If I’m not mistaken of course, my apologies if so.
So in the US, there are two kinds of corporations: Public (as in publicly traded on the stock market) and Privately owned (shareholders with stock unavailable to the public).
Publicly traded companies are required to be much more transparent to the public and their potential/active investors (to deter earnings fraud ala Enron), so therefore have plenty of data published for analysts to work with.
Privately held companies, by contrast, don’t need to tell the public anything. By not being listed on the stock market, they can do almost anything they’d like with little danger of their business practices being scrutinized (It also doesn’t help that the US is relatively weak when it comes to business regulation to begin with).
However, one advantage of this is that they aren’t beholden to public investors demanding growth above all else - Publicly traded companies are legally bound to prioritize shareholder demands ahead of any other duties. Valve, for example, is able to perform a lot more pro-consumer moves with their services and software because they don’t have Wall Street hounding them for quarterly returns.
Unfortunately, the reality is you can’t have the best of both situations from the public’s perspective. The US has more financial obscurity than is typically presented, and that often manifests as businesses dodging regulation, oversight, and accountability as much as possible. Mars, for instance, probably has skeletons in their closet on the supply chain front (abuse in the production of chocolate), that may give them incentives to remain as private as possible - no financial records, no transparency reports, no investor conferences.
(Also slightly away from the subject but consolidation is incredibly high in the US - many industries are effectively controlled by an oligopoly of companies)
But why can’t you have the best of both situations from the publics perspective? You could require companies to disclose financial numbers if above a certain size, even if privately owned. That wouldn’t force the owner(s) to be beholden to anyone, they just have to report the numbers. It’s what we do here.
When you say “the reality is”, do you mean that the existing players are just too powerful to allow it? Or is there something inherint to the system that wouldn’t allow it?
Campaigns, campaign financing, and lobbying. US polotics is pay to play. Plus Americans are very individualistic. We would rather get screwed over by companies and the rich then have government tell us what to do. Does not always make sense.
The players are just too powerful to allow it. There’s no limitations if a private corporation wanted to disclose information, but unless they are compelled, it will not happen. To our congressional representatives and current supreme court, applying any “burdensome restrictions” on corporations any more than the existing status quo is political poison for their careers.
I agree with you that it would be better if that were the case, but the reality is the regulators are complicit in the system being as broken as it is.
Capitalism isn’t a system that functions by any real plan of humans, but by what’s profitable. Capitalism is a control system in a sense, relying on profits for information. In more “advanced,” higher stages of capitalism, with less working class organization to resist it, laws better reflect whoever has the most capital. Statesian capitalism isn’t “designed,” it’s a system of plunder that is more naked due to the US Empire being the global imperial hegemon. Denmark is imperialist, but secondary to the US (as well as other countries like France, Germany, the UK, etc), and has stronger worker organization, as well as proximity to the former soviet union, so it isn’t quite as nakedly terrible.
Competition isn’t really a thing in the US at the high level.
They all work together to make sure new competitors can’t compete.
Even in some EU countries it’s not required.
At least in my country (CZ) there are more types of companies some have to disclose earnings, yearly economic outcomes… and some don’t have to do it. Even there it is different on how much it is disclosed publicly or only to “shareholders” (owners usually) and how detailed it is.
Most countries don’t require it for privately traded companies.
The standard for reporting for private companies is usually far lower than publicly traded companies because it is expected that people with enough money to invest in financial companies have enough money to invest in their own auditing.
Also, as you pointed out, there is value in that data. It appears to be that companies would rather keep their data private than look at others’ public data.
