BUSINESSES LARGE AND SMALL
Small businesses, those having fewer than 500 employees, loom large in the
U.S. economy. They can respond quickly to changing economic conditions and
customer needs with innovative technical solutions to production problems. Their
share of nonfarm GDP reached 50.7 percent in 2004.
"Of the nearly 26 million firms in the United States, most are very
small—97.5 percent ... have fewer than 20 employees," the U.S. Small Business
Administration says. "Yet cumulatively, these firms account for half of our
nonfarm real gross domestic product, and they have generated 60 to 80 percent of
the net new jobs over the past decade."
Many entrepreneurs began by tinkering with hand-assembled machines in a home
garage. A few expanded small businesses quickly into large, powerful
corporations. Some examples: software manufacturer Microsoft, delivery service
Federal Express, sports
clothing manufacturer Nike, online service provider AOL, and ice cream maker
Ben & Jerry's.
Women own and operate many small businesses. In 2002, women-owned businesses
accounted for 28 percent of all U.S. companies except for farms, 6 percent of
all U.S. workers, and 4 percent of U.S. business receipts.
Persons from minority groups run many small businesses. Of all U.S. nonfarm
firms in 2002, 6.8 percent were owned by Hispanic Americans, 5.2 percent by
African Americans, 4.8 percent by Asian Americans, 0.9 percent by American
Indians or Alaskan Natives, and 0.1 percent by Native Hawaiian or other Pacific
Islanders
Small businesses employ almost exactly half the private U.S. labor force of
about 153 million. In 2003 the average small business had one location and 10
employees; the average big business, 61 locations and 3,300 employees.
Many U.S. businesses large and small are organized as publicly traded
corporations. Corporations have proved especially effective at accumulating the
money needed to pay for launching and expanding operations.
To raise money, corporations sell stock (ownership shares in their assets) or
bonds (loans of money) to investors. Commercial banks also lend money directly
to businesses large and small. Federal and state governments enforce detailed
regulations to ensure the safety and soundness of this financial system and give
investors the information they need to make well-informed decisions.
A major corporation may be owned by a million or more people, most of them
holding shares worth tiny fractions of the company's total worth. About half of
all U.S. households own common stock, directly or through mutual funds or
retirement pension investment plans.
"The majority of America's workers are participants in our capital markets,"
Christopher Cox, Securities and Exchange Commission chairman, said in a 2007
speech. "It is increasingly true—and increasingly apparent—that what's good for
American investors is good for the American people."
Because shareholders generally cannot manage a corporation's business
themselves, they elect a board of directors to make broad policy. Corporate
boards place day-to-day management decisions in the hands of a chief executive
officer (CEO).
As long as a CEO has the confidence of the board of directors, he or she
generally is given broad freedom in running a corporation. But stockholders,
acting in concert, can force a change in management. In an extraordinary display
of assertiveness in 2004-2006, boards forced out the chairmen or CEOs of several
major corporations for perceived failures in ethical behavior or performance.
Most corporations are small; some are gigantic. In 2006, a year of record oil
prices, Exxon Mobil Corporation reported a record annual profit for a U.S.
corporation of $39.5 billion—more than $75,000 per minute—on revenue of $347
billion. Wal-Mart stores topped the list for 2006 corporate revenue at $351
billion.
But aren't workers the ones making the U.S. economy productive?
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