The goal of these companies is not the betterment of society, but immortality through an uninterrupted stream of earnings.I have always thought that an implication of these ideas is that large firms, e.g. those in the S&P 500, would be very long lived. After all given the amount of control that these firms apparently have over their markets and the economy at large its hard to see how they could ever go bankrupt or be taken over. They are, after all, able to ensure "immortality through an uninterrupted stream of earnings." Thus these firms would have a long life.
Given this I was interested to see this comment by Bourlee Lam at The Atlantic:
[...] Richard Foster, a lecturer at the Yale School of Management, has found that the average lifespan of an S&P company dropped from 67 years in the 1920s to 15 years today. Foster also found that on average an S&P company is now being replaced every two weeks, and estimates that 75 percent of the S&P 500 firms will be replaced by new firms by 2027.I just don't see how a 15 year (or even a 67 year) life span is in anyway consistent with the story that Galbraith tried to tell. Such a short life time looks more like support for a Schumpeter like "creative destruction" interpretation of the life cycle of business firms.
Just to show how short a life span 15, or even 67 years, is note:
Cho and Ahn (2009: 160-1) state “The oldest company in the world is known to be a Japanese construction company, Kongo Gumi, which was founded in 578 and thus existed for 1431 years. [However a footnote at this point states “Kongo Gumi went bankrupt in 2006 and was acquired by Takamatsu group, thus depending on the definition of corporate death it may be excluded from a long-lived company” According to Wikipedia (http://en.wikipedia.org/wiki/Kong_Gumi), “As of December 2006, Kong Gumi continues to operate as a wholly owned subsidiary of Takamatsu”.] There are also several other companies which are reported to have existed over 1000 years such as Houshi Ryokan (Japan, Innkeeping, founded in 717), Stiftskeller St. Peter (Austria, restaurant, founded in 803), Chateau de Goulaine (France, vineyard, founded in 1000) and Fonderia Pontificia Marinelli (Italy, bell foundry, founded in 1000)”.Ref.:
- Cho, Dong-Sung and Se-Yeon Ahn (2009). ‘Exploring the Characteristics of the Founder and CEO Succession as Causes of Corporate Longevity: Findings from Korean Long-Lived Companies’, Journal of International Business and Economy, 10(2) Fall: 157-87.