Economic opinion Essay Example | Topics and Well Written Essays - 750 words

Economic opinion - Essay Example In the book it is concluded that owners of private equity reduce more jobs than the other firms, however, the net impact is minimal and following a private company taking over a firm, it their people who take over as directors who fare bad in terms of retention of jobs. Also according to the book, research shows that wages decrease in a span of two years following the private-equity buyouts even though there is an increase in productivity. This proposes that financial profits from high output are being changed into returns for owners instead of salary hits for the workers. Also, whereas some private-equity companies market themselves to be union friendly, some are unfriendly and still others are opposed (Weber 1). According to the authors of the book cited in the article, there are a number of things that distinguish the private-equity companies from those that are traded publicly. One is that such companies have great amounts of debts. Approximately, privately equity companies run with approximately 70 percent debt and 30 percent equity. This ratio is basically reversed by the public firms which has approximately 30 percent of to their capital from bonds, as well as other liabilities (Weber 1). The article also states that whereas the inventors in the public companies are mostly distinct from those who manage the company, the private-equity owners are the ones who manage the companies despite being the investors. This builds incentives for the owners manage the operational decisions for the short-term profits to the owners. Partly owing to this, the private-equity companies are most expected to file for liquidation as compared to the public companies, which result to notable loss of jobs at the individual firms (Weber 1). Private equity as a type of organization has its basis in venture capital. The type that is most common is the leveraged buyout (LBO) and this is the one that is under challenge. The