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Daily Bread for 2.1.24: Private Company, Public Company, Public Agency

 Good morning.

Thursday in Whitewater will be partly cloudy with a high of 47. Sunrise is 7:08 and sunset 5:08 for 9h 59m 35s of daytime. The moon is a waning gibbous with 63.9% of its visible disk illuminated.

Whitewater’s Ethics Committee meets at 5 PM

On this day in 1942, Voice of America, the official external radio and television service of the United States government, begins broadcasting with programs aimed at areas controlled by the Axis powers.


There’s a difference between a private company, a public company, and a public agency. Ordinary people understand this difference, but special interests conflate these three different arrangements to maximize their influence over wholly public agencies. 

First the distinctions, with help from Matt Levine’s description of Elon Musk’s influence on private companies as against public companies. A private company is held individually or by shareholders with shares that do not trade on a public exchange. A public company is a private enterprise with shares that do trade on a public exchange (e.g., the New York Stock Exchange). Levine writes of Musk’s considerable leeway with a purely private company like SpaceX:

At all but one of his companies, he could stroll into the boardroom, throw a big bag of ketamine down onto the table, and say “I need the company to spend $50 million to build a giant golden statue of me riding a rocket,”1 and

  1. the board would be like “yes definitely let’s do it,”

  2. the board members themselves probably are, or represent, big shareholders of the company, and as shareholders they would happily go along with the statue plan to keep Musk happy and dedicated to their company,

  3. the other shareholders, the ones without board seats, are probably even bigger Musk fans, and are probably working on their own Musk statues in their garages anyway, so they’ll be fine with the company spending their money on a corporate gold statue, and

  4. nobody else really has any standing to complain.

And so in fact when Musk went to SpaceX and asked to borrow $1 billion until payday so that he could buy Twitter Inc., the board was like “here’s the check, we’ve left the amount blank, take whatever you need.” And, look, was there a Wall Street Journal article saying “hey that’s weird”? There was; it was weird. Did anything come of that? No. SpaceX could just do that: Musk controls SpaceX, the board loves him, the shareholders love him, nobody in a position to complain has any complaints, and everybody else is in no position to

SpaceX is a bigger version of many private companies: these companies may have one or more owners, and those owners may be shareholders, but those shares are not available for ready trading by the general public. These owners have considerable leeway. 

By contrast, a public company is also a private enterprise, but it offers shares on a public market to which the general public has access during trading hours. Trading on public markets comes with public — governmental — rules & regulations. (There’s a Securities and Exchange Commission, after all.) Levine explains how rules for a public company like Tesla limit Musk:

Tesla is a public company, which means that, even if 99% of shareholders love him, if 1% of shareholders don’t, they can sue.3 They can say: “Look, the board has a fiduciary duty to manage the company on behalf of all shareholders. Giving Musk a giant golden statue of himself is not necessary, or a good business decision, or fair to the shareholders; it’s just the controlling shareholder fulfilling his own whims with corporate money, and an ineffective board of directors giving him whatever he wants. He should have to give it back.” And they will go to court, and the shareholders will make those arguments, and the board will say — accurately! — “no you see giving him this giant golden statue is necessary for us to get more of his incredibly valuable time and attention,” and that will sound bad in court. And then a judge will get to decide whether the deal was fair to shareholders or not, and if it was not, the judge can make Musk pay the company back. Even if the board, and 99% of the shareholders, want him to keep it!

Levine’s description of Musk ends here, understandably, because Levine is writing about Musk’s role in private and public companies. An analysis of these companies is distinct — as Levine knows intuitively — from public agencies and governmental bodies. 

Special interests, however, don’t see it that way: they look at public bodies (a town council, a school board, or a community development agency) and expect that they can manipulate and control that public institution like a private company. They see a public body as another of their private possessions. 

No, and no again: formed only by statutes and ordinances, maintained only under statutes, ordinances, and publicly-adopted policies, these councils, boards, and agencies are public from alpha to omega. 

Special interest men in Whitewater take public bodies and illegitimately and wrongfully refashion them through catspaws into versions of private companies. In this way, they place their hands around a public agency and squeeze until it does their private bidding.  

Which appointed officials come along matters less to the health of this community than that special interests meet their match from among residents until attrition and exhaustion take their toll on that scheming faction. 


What’s in the Night Sky February 2024

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Attendee
21 days ago

Nice summary at the end, “Special interest men in Whitewater take public bodies and illegitimately and wrongfully refashion them through catspaws into versions of private companies. In this way, they place their hands around a public agency and squeeze until it does their private bidding.

Which appointed officials come along matters less to the health of this community than that special interests meet their match from among residents until attrition and exhaustion take their toll on that scheming faction.”

People are tired on being foot stools for the old guard, right?