Can Family-Owned Firms Compete? | The Business Desk with Paul Solman | PBS NewsHour

ABOUT US \| LOCAL TV LISTINGS EMAIL PRINT

REGION: North America

TOPIC: Business & Economy

PBS NewsHour

Not a blog but a "q-and-a" (pronounced "quanda"), this page is about the basics of economics. Its premise: there are no stupid q's. And if some a's seem dim, take heart: I can brighten them up in response to objections, corrections, refinements. Comments on posts feature yours, and my responses. Enough of you now frequent and query the quanda that I post most every day. Haven't seen your q yet? Send it again. All a's should be taken with a shaker of sodium chloride, if not a Lot's-wife's-worth. And speaking of salt, the mustache and "hair" in the photo has a lot less of that condiment, and rather more pepper, than can be seen on TV. Think of it as time travel.

« Previous Entry | Main | Next Entry »

Can Family-Owned Firms Compete?

Hundreds of Marshmallow Peeps move down the conveyor belt to be boxed up at Just Born, Inc., a family-owned and operated confections business. Photo by Don Emmert/AFP/Getty Images.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here's Friday's query:

Name: Steven Hall

Question: How do family-owned corporations like SC Johnson and Boehringer Ingelheim compete with joint stock companies?

Paul Solman: The argument for family-owned firms has long been that they are insulated from the whims of the public markets with their what-have-you-done-for-me-yesterday? mentality. Thus they can invest long term without always having to produce greater profits in this three-month period than the three months prior.

There are two problems. One, if such firms need huge infusions of capital and can't borrow it, they have no choice but to sell stock to the public to raise capital. But more important, in my reportorial experience, is that the firms' founders have kids, and the kids have kids, and eventually the stock is spread among a whole bunch of people. If enough of them want to cash out, the only way to do it is sell -- either to other private investors like those in the "private equity" world or to the public via a stock offering.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight.

Follow @PaulSolman

-- Posted March 2, 2012 | Comments ( ) | Permalink