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Tuesday, 19th January 2010

Taxpayers benefit if governments emphasize shareholder role in managing equity stakes in financial institutions

Taxpayers benefit if governments emphasize shareholder role in managing equity stakes in financial institutions
Source: World Economic Forum

Taxpayers will benefit most if governments put shareholder responsibility ahead of political considerations when it comes to managing their equity stakes in financial institutions. With over US$ 700 billion of taxpayers’ money invested, the wrong choices – in policy objectives, management strategy, or emphasis in execution – could cost taxpayers billions of dollars and have long-term implications for the stability of the global financial architecture.

The challenges facing governments managing and resolving these newly acquired equity interests in financial institutions are explored in a new working paper from the World Economic Forum in collaboration with Oliver Wyman entitled Governments as shareholders: navigating the challenges of newly held interests in financial institutions. Over 150 leaders in public policy, academia, and business collaborated as part of a year-long study.

Their discussions raised six key suggestions for governments:
1. Address equity stakes separately from other types of crisis intervention
2. Aim for a rapid exit whilst protecting investment value
3. Establish an independent process to manage ownership stakes
4. Restrict government influence on owned institutions to board-level issues
5. Be realistic about securing and incentivizing the best available talent
6. Raise transparency beyond public disclosure of financial performance

+ Working Paper


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