ATTORNEY: H. ADAM PRUSSIN
POMERANTZ MONITOR May/June 2017
A recent academic study of public corporations in America has produced a picture of dramatically increased business concentration over the past 40 years. The study, done by professors Kahle and Stulz of Arizona State and Ohio State universities, respectively, which was published earlier this year, reveals the following startling facts about corporate
America in 2015 vs. 1975:
• In 1975, there were 4,819 publicly listed U.S. corporations. In 1997 there were 7,507. In 2015 there were only 3,766.
• Despite this decline, the aggregate market capitalization of U.S. public companies is seven times larger, in constant dollars, than it was in 1975. The 2015 mean and median market values of the equity of public companies (in
constant 2015 dollars) is almost 10 times the market values in 1975. In short, although there are far fewer public companies, they are far larger than ever before.
• An ever smaller proportion of public companies are responsible for most of the profits and assets. In 1975, 94 companies accounted for half of the assets of all public companies and 109 companies accounted for half of the net income. In 2015, 35 corporations accounted for half of the assets and 30 accounted for half of the net income.
• Capital expenditures as a percentage of assets fell by half between 1975 and 2015, while R&D expenditure increased fivefold. Capital expenditures are depreciated over time while R&D costs are expensed in the year incurred.
• In 1980, the first year for which the data are complete, the authors found that institutional owners represented 17.7% of ownership of U.S public companies. By 2015, the figure was 50.4%.
• The highest percent of net income paid out to shareholders during the 40-year period between 1975 and 2015 was in 2015. These payouts were not mostly in the form of dividends, but instead, of share repurchases.
It seems as if the “winner take all” phenomenon of outsized financial rewards for the top one percent of the population seems to apply at the corporate level as well.
As wealth becomes more and more concentrated, so too is the influence of the wealthy, not only in the business world but in the political world as well. Particularly after the Citizens United case, super-wealthy individuals and corporations are free to throw their financial weight around.