When a corporation is first established, its shares may be privately held by a small group
of investors, perhaps the company’s managers and a few backers. In this case the shares are
not publicly traded and the company is closely held. Eventually, when the firm grows and new
shares are issued to raise additional capital, its shares are traded in public markets such as
the New York Stock Exchange. Such corporations are known as public companies. Most wellknown
corporations in the U.S. are public companies with widely dispersed shareholdings.
In other countries, it is more common for large corporations to remain in private hands, and
many public companies may be controlled by just a handful of investors. The latter category
includes such well-known names as Fiat, Peugeot, Benetton, L’Oréal, and the Swatch Group.
A large public corporation may have hundreds of thousands of shareholders, who own the
business but cannot possibly manage or control it directly. This separation of ownership and
control gives corporations permanence. Even if managers quit or are dismissed and replaced,
the corporation survives. Today’s stockholders can sell all their shares to new investors without
disrupting the operations of the business. Corporations can, in principle, live forever, and