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October 23, 2009

The Government is the Shareholder, Now They Need to Act Like It


The recent discussion out of the government ownership camp involves limiting executive pay and bonuses for organizations that received government bailouts. In what may be considered disbelief, I actually agree with the government's approach, I'm simply upset with all the whining the left is doing while implementing it.


The government is now the largest shareholder in almost every organization it is offering assistance to. As the largest "owner," it has to be the one that sets business policy and oversees the Board of Directors. These are the duties and responsibilities of the shareholder. Someone did not tell the left this before they took over these companies.


Apparently, the left felt that they could own a minor portion of these companies and that they would govern themselves. The government believed it would not need to spend resources managing the board of directors or any specific operational issues (ie bonuses), and that these companies would simply handle themselves. This is not the case.

The shareholders are the owners of a corporation. They must oversee the board (that's why they select board members) and ensure that the company is operating in their best interests. If the shareholders leave EVERYTHING to management, too many decisions will be made for short term gain, which will eventually reflect negatively on the long term profitability of the company.

In addition to this, companies who mismanaged themselves in insolvency only to be saved by the government, aren't going to suddenly become responsible with a government bailout. That's like assuming that someone who's bad with their own money will be more responsible with someone else's.


By the government acting like the shareholder/owner, it will prove that government ownership of any private company is not a feasible solution. Once the American people have seen 3-4 years of General Motors mismanagement (especially on the production end), the game of government ownership will be up. But, the left will always have an out if they do not invoke the shareholder model. They can simply blame the failures on poor management and take little/no responsibility for corporate failures.

Invoking the shareholder model will slightly increase the chance of government ownership, but it also will exemplify the purpose of private enterprise. Every American should pay attention carefully and see what the government manages to take control of next.

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