This posting addresses greed and corruption in companies.
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Is there less greed and corruption in privately held companies that public companies? If so, why is that?
Is it just the size of a corporation that renders them more susceptible to corruption? When you compare McDonalds to In-n-Out Burger (privately held CA chain) can you make any prediction on the likelihood of fraud or tax evasion?
As corporate executives how can you prevent violations before they occur? What predictors are out there?
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Solution Summary
The solution provides discussion debating if there is more greed and corruption in public companies compared to private companies.
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In a general sense, yes, I would definitely agree that there is less corruption and fraud with privately held companies. IT is possible that the fraud going on in private companies is not as publicized as what's going on in publicly held companies, but as a whole, it is definitely less in private companies. The main reasons include that in publicly held companies, the revenues are bigger, there are more stockholders, and oftentimes, executive bonuses and other benefits are directly tied to company profits. This gives executives a great incentive to commit fraud and other corrupt activities. They know, for a fact, that how well the company does directly affects the amount of their bonus check. Executives therefore have a great motivator to be greedy, and falsify sales or expenses, in order to boost company profits (and their year-end bonus checks).
Another reason that there is more corruption in publicly held companies is due to investors. Publicly held companies have a higher number of investors, oftentimes for big money. When ...
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