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Public vs. Private
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Sitting in the privileged seat of being able to watch public, quasi-public, and private companies in the pulp and paper industry, this recession has taught me a very important lesson. Private companies hold huge advantages over their public brethren.

Why is this so?

1. Private companies answer to lenders, but the level of interchange seems more reasoned and pragmatic than one finds with a public company, which must answer not only to securitized lenders, but also to public equity watchdogs of every conceivable ilk.

2. Private companies do less posturing. Public companies, in a cover one’s posterior mode, often hire large, brand name consultants to add an aura of credibility to their decisions. Often, these consultants, very good at certain tasks, are cast outside their area of expertise for their brand name endorsements of management’s plans. Such misplaced trust can be disruptive and perhaps even downright wrong at times.

3. Private companies can do the unconventional, counter-intuitive things they know work without answering to anyone. I have watched several do this in the last year with great results.

4. Senior management in public companies has little time to manage the business. Their role has evolved into one of managing analysts, special interest advocates, regulatory authorities, and the like. The executive office has become a bifurcated one, not only costing more money due to more overhead (a small cost), but one that holds hidden costs (which can be a very large cost) when the messages, external and internal, become mixed and confusing.

It just may be that bigger (and more public) is not always better.

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