What happened: The number of U.S. public companies has fallen by roughly 50% over the past 30 years as many fast-growing businesses choose to remain private instead of going public. The culprit: public company governance.

Tell me more: Public company governance refers to a system in which many different groups—all pursuing their own agendas—issue a discordant set of advisory opinions, rules, norms and regulations for how a company should be managed. These groups are outsiders who have only a passing acquaintance with the public company’s operations, yet they are interfering with managers’ decision making. 

Worth noting: Hundreds of empirical studies have found that the explosion of rules, regulations, legislation and voting policies have been ineffective or even counterproductive. Notably, the installation of independent directors on boards has not increased corporate performance.  

TLR Thoughts: Overregulation and misguided governance practices are steering companies away from public markets, limiting opportunity and stifling for everyday investors.

TLR will continue to advocate for legislation that ensures that managerial and other company leadership decisions are given their due deference. During the most recent Texas legislative session, TLR supported SB 29, which guarantees that board decisions are not second-guessed by Texas courts by 1) codifying the business judgment rule and 2) allowing corporations to establish a minimum ownership threshold as a prerequisite to bringing a shareholder derivative lawsuit. SB 29 is fighting back against the growth of public company governance by empowering companies to run themselves. 

TLR will continue advocating for commonsense reforms that make Texas the best place in the nation to run a business. 

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