The privatization of Hydro One is a terrible idea, for many reasons. There is one argument that I have not seen in the press, and I’d like to present it now.
The idea that retaining the single largest portion of shares guarantees control is naive. The danger is not total loss of ownership. The danger (and inevitable effect) is that on an ongoing basis decisions will be weighed in terms of what the shareholders will think. Will they sell? Will the value go down? Up? The corruption is not in the gross effect, but in the innumerable details of policy driven by a financial system that is out of control.
When any company goes public and sells shares, a new element is introduced that often overrides everything else: shareholder value. When shareholders are added, the need to keep the value of the shares continually rising overrides everything else. The market is extremely sensitive, volatile and focused on the short term. This becomes the primary driver of policy.
A government should be making policy in the best interests of its citizens. It also has a responsibility to its suppliers, part of keeping the economy healthy. It should not be making policy to satisfy the needs of investors staring at their computer screens and deciding whether or buy or sell.
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