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Public company, Securities law, Corporate governance, Unicorn firms, Retrospective regulatory review


This Article suggests that the ubiquitous “public company” regulatory category, as currently constructed, has outlived its effectiveness in fulfilling core goals of the modern administrative state. An ever-expanding array of federal economic regulation hinges on public company status, but “public company” differs from most other regulatory categories in that it requires an affirmative opt-in by the subject entity. In practice, firms today become subject to public company regulation only if they need access to the public capital markets, which is much less of a business imperative than it once was due to the proliferation of private financing options. Paradoxically, then, public company regulation is both more important than ever and easier than ever to avoid.

This new state of affairs raises a foundational question of regulatory design: Can and should the applicability of an important part of federal law depend on self-elective public company status? The Article answers this question through an original analysis of the genesis, idiosyncrasies, persistence, and ultimate erosion of the public company regulatory category. It draws on a detailed review of the historical record and over 50 federal corporate governance proposals between 1903 and 2023. This includes a hand-collected sample of recent proposed bills tied to public company status—highlighting both the ongoing demand for new economic regulation and the prevailing inertia in conditioning regulation on public company status. The Article also applies an assessment framework adapted from the literature on regulatory review in administrative law and inquires into factors such as fidelity to statutory objectives, changes in relevant conditions, the regulatory treatment of similar cases, the rate of regulatory complexity, and the incidence of regulatory divergence.

Ultimately, there is serious cause for skepticism about the viability of the current model, both with respect to the traditional goals of public company regulation (investor protection, capital formation, and capital market efficiency) and with respect to newer economic governance goals (accountability, transparency, voice, and aggregate efficiency). The Article responds to these findings by outlining several alternative regulatory approaches. Among other takeaways, shifting the frame away from the entrenched public company category suggests that in certain important aspects of economic governance, regulation should cover significant firms irrespective of their financing choices and, potentially, non-profit entities engaging in significant economic activity.

Short of wholesale reform, this Article has one immediate message for legislators and policy advocates: when designing new bills that touch on any aspect of economic governance, think carefully before conditioning those bills’ applicability on public company status.

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Harvard Business Law Review