Hobby Lobby: Another Victory for Closely Held Corporations

In the middle of a victory for conscience, this:

The Supreme Court ruled Monday that certain “closely held” for-profit businesses can cite religious objections in order to opt out of a requirement in ObamaCare to provide free contraceptive coverage for their employees. 

The whole business of closely held corporations has been lost in the predictable food fight (that’s about as accurate a description of any American political debate these days, even though the stakes are high) following SCOTUS’ decision.  The fact is that, had Hobby Lobby and Conestoga Wood Specialties been publicly traded corporations, the ruling wouldn’t have gone the way it did.

But they aren’t.  They were closely held corporations, i.e., those which are controlled by a relatively small group of stockholders, usually family.  Although that’s a substantial part of the corporate world, with larger corporations it’s been rare for them to stay either closely-held or privately traded as they get larger.  (It’s an interesting speculation whether privately held corporations which are owned by investor groups would be covered by this ruling, but I digress…)

Generally speaking, as corporations become large, they’ve traditionally gone public to give themselves access to the broad source of equity funding that public ownership has allowed.  In this country, however, a series of “reforms” starting with Sarbanes-Oxley and careening to Dodd-Frank and other types of legislation have made going public through an initial public offering (IPO) increasingly unattractive.  This ruling is simply another step in that process.

For all the wonder of a closely-held corporation, public trading of securities enables broad ownership of wealth-creating entities that would otherwise be unavailable to many.  In an era when people decry the stratification of wealth in our society, turning around and making public ownership unattractive for corporations to pursue isn’t a good idea.  And how do all of these Boomers plan to get pension checks or IRA drawdowns when publicly traded securities become scarcer?

I doubt that this ruling is going to influence many corporations to either go private or skip going public.  But it’s another push in the direction of making our corporate system more private than ever.  And that’s going to have some unintended consequences very few want to see.

Note on ObamaCare itself: SCOTUS’ ruling also hung on many of the options and opt-outs in the ACA.  That could have been avoided if the left had gone for single-payer first, either directly or from a “bottom-up” approach such as nationalising Medicaid.  Instead they passed an expensive kludge that, in the end, no one will really want except for those who can get someone else to pay the premium.

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