Editorial Balancing act

Two of the bogeymen in our business culture are corporate concentration and hostile takeovers. But in the true spirit of a free market seeking its own level of equilibrium, these two forces may be in the process of evening each other out, market style. Regulators who tamper with rules must be very careful when they modify the process in any fashion.

The evolving concentration of business is unquestionable and the process is worldwide. In 1975 the 10 largest mining companies of the Western World controlled 29% of the total value of non-fuel mineral production at the mining stage, according to a commodity research group based in Sweden called Raw Material Group. By 1984 this figure had risen to 36%. In five of the 10 most important metals the three largest companies controlled more than 40% of the value of Western World mine production.

In Canada, half a dozen major mining companies comprise 90% of the non-ferrous metal output. What’s more, recent and imminent mergers and acquisitions indicate that the process is actively continuing. Economies of scale justify concentration, but fair competition fears too great a control by too small a group.

Perhaps the leveraged buyouts of corporate raiders, the stripping of companies of their assets and selling them individually, is a way to counter concentration and the resulting lower values those large companies show on the stock market.

Corporate concentration may benefit a company’s bottom line, but if the owners — the shareholders — can’t realize that value, perhaps the company would be of more value broken up. The ultimate goal is not to perpetuate some corporate entity but to maximize the return to shareholders.