In the 80s the abuse was concentrated in the management layer of companies - executives would store cash and buy private jets and lavish properties for the “company” leadership to enjoy. Private equity trimmed that fat at the time.
Public investors have an expectation of not losing their money. Thus public companies have to have either expectation of growth or strong cash flow to feed dividends. If a company has neither of those, Private Equity either turns it around or sells it for parts. They are the vultures of the business world. They buy the company with debt that its cash flows are supposed to pay back, and profit from the tax deduction on the debt and whatever is left in the end. A company is a machine where you put in 1 dollar and it comes back with more than 1. Employees get paid with steady reliable income called salary before investors do until the machine runs out. By law the board has to pay payroll if the employees are not compensated, or the board is personally liable for the salaries. They also have an inside view with how the company is doing better than any investor. They can and will
bail when something goes funky. Any equity over is the perk of taking risk by investing in the company. The stress of wondering whether you will make payroll or have a business left after you have worked so hard to create and sweat so hard to work it is so deep that few would take it on - thus you have to give them proportionate carrot to look forward to or there would be no jobs.
