What ails the public-company ownership model? For generations, public ownership was unassailable as the right way to promote the best management of a company's short-term performance and long-term health. As a worldwide equity culture blossomed during the second half of the last century, the evidence appeared everywhere: mutually owned companies demutualized, family- or employee-owned businesses undertook IPOs, and governments privatized state-held enterprises to capture the long-term value created by the capital market approach to governance.
Not so today. More than half of all CFOs say they would cut a project with a positive net present value to hit a short-term earnings target set by the market.1 Private equity firms are raising capital at a record pace, acquiring businesses, and in many cases creating tremendous value for themselves and their investors. And corporate boards of directors, which are meant to manage for the long term, are getting sucked into short-term issues, such as compliance. Family-controlled companies (or those influenced by families with a substantial stake) have often performed better than companies that are fully publicly owned—particularly in Asia.