New organizations are emerging in its place—organizations that are corporate in form but have no public shareholders and are not listed or traded on organized exchanges. These organizations use public and private debt, rather than public equity, as their major source of capital. Their primary owners are not households but large institutions and entrepreneurs that designate agents to manage and monitor on their behalf and bind those agents with large equity interests and contracts governing the use and distribution of cash.

A version of this article appeared in the September–October 1989 issue of Harvard Business Review.