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Eclipse of the Public Corporation

Michael C. Jensen

Social Science Electronic Publishing (SSEP), Inc.; Harvard Business School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

HARVARD BUSINESS REVIEW (Sept.-Oct. 1989), revised 1997.

The publicly held corporation has outlived its usefulness in many sectors of the economy. New organizations are emerging. Takeovers, leveraged buyouts, and other going-private transactions are manifestations of this change. A central source of waste in the public corporation is the conflict between owners and managers over free cash flow. This conflict helps explain the prominent role of debt in the new organizations. The new organizations' resolution of the conflict explains how they can motivate people and manage resources more effectively than public corporations. (HBR McKinsey Award Winner)

Number of Pages in PDF File: 31

Keywords: Governance, Agency, Control, Organizational Innovation, Going Private, Control Function of Debt, LBO Associations

JEL Classification: G32, G34

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Date posted: May 3, 1999  

Suggested Citation

Jensen, Michael C., Eclipse of the Public Corporation. HARVARD BUSINESS REVIEW (Sept.-Oct. 1989), revised 1997.. Available at SSRN: http://ssrn.com/abstract=146149 or http://dx.doi.org/10.2139/ssrn.146149

Contact Information

Michael C. Jensen (Contact Author)
Social Science Electronic Publishing (SSEP), Inc. ( email )
7858 Sanderling Road
Sarasota, FL 34242
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305 675-3166 (Fax)
HOME PAGE: http://ssrn.com/author=9

Harvard Business School ( email )
Soldiers Field
Negotiations, Organizations & Markets
Boston, MA 02163
United States
617-510-3363 (Phone)
305-675-3166 (Fax)
HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=6484
National Bureau of Economic Research (NBER) ( email )
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Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI) ( email )
B-1050 Brussels
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References:  16
Citations:  237
Footnotes:  21

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