Discussions on the history and historiography of Australia's New England

Tuesday, December 07, 2010

Social Change in New England 1950-2000 8: unlisted public companies

In an earlier post in this series, Social Change in New England 1950-2000 5: end of local media ownership I talked about (as the title said) the end of local media ownership. In Rural Press, Fairfax and Brian McCarthy, a post on my New England Australia blog, I talked in part about the fall of the unlisted public company. The two are connected.

Unlisted public companies were quite important in the economic fabric of New England life for a period. Their decline was was of the social and economic changes that took place in New England over the second half of the twentieth century. For that reason, I thought that I should do a note here as part of my current social change series.

While there are still unlisted public companies, that is public companies not listed on any stock exchange, there is really no modern equivalent so far as small companies are concerned. Regulatory and compliance costs now rule the structure out.

Public companies were formed because they facilitated capital raising and share transfers, while providing the protection of limited liability. Many of these New England companies were very small even then by comparison to their metro equivalents. By today's standards, they were tiny.

To put this in perspective, the local department  store, the newspaper, the car dealership might all be unlisted public companies. 

The unlisted public company structure was well understood. It was normal practice when considering a significant new venture to consider the formation of an unlisted public company as a way of gathering local or regional capital and of spreading risk.

Risk avoidance was important. Reading the board papers of companies such as the Armidale Express, Northern Newspapers or Broadcast Amalgamated, there are constant references to business risks and uncertainties. One way of managing this in the case of new ventures, was to form a new public company controlled by one or more of the existing companies.

While there were wealthy families and individuals in New England some of whom did invest, many of the investors appear to have been medium size graziers and middle class town people both business and professional. Unlisted public companies formed an important vehicle for capturing local capital for local use. They also provided a market for local professionals such as accountants and lawyers. Big city law firms were used on more complex matters especially where city activities were concerned, but local service supply was still important.

Some of the companies developed into significant businesses. Some became listed companies. But all were to vanish.

I have not traced the decline of the unlisted public company across New England, but I think that it was concentrated in the fifteen years from the end of the 1960s. Most were taken over by outside interests, some by local entrepreneurs looking to expand. Structural change in combination with rising compliance costs meant that there were no replacements.

An era had ended. With their passing went a key mechanism for capturing local capital for local investment. With them went the local head office jobs, replaced by lower level external reports. By 2000, and I have to scope this properly, New England had become a capital  exporter whose profits and savings funded development elsewhere.  

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