Governments should put shareholders' interests ahead of political considerations when they think of picking or selling equity stake in financial institutions, the World Economic Forum has suggested.
"With over $700 billion taxpayers' money invested, the wrong choices -- in policy objective, management strategy or emphasis in execution -- could cost tax payers billions of dollars and have long term implications for the stability of the global financial architecture," according to the working paper from the WEF, in collaboration with Oliver Wyman, released from Geneva.
The paper, which suggests ways for governments to manage and resolve new equity stakes in financial institutions, is part of a year long study by 150 industry leaders.
As the global economy recovers, governments find themselves transitioning from a focus on crisis containment, to a focus on managing its intervention towards eventual resolution," WEF Director and Head of Investors Max Von Bismarck said.
Oliver Wyman Partner Julia Hobart said, "Government officials, with the support of the private sector experts, must ensure that the same principles that define good management in the private sector -- leadership, governance and transparency -- are applied in this current public sector situation."
With over $700 billion of new equity investments in financial institutions, governments and the tax payers they represent, have a strong vested interest in ensuring that these investments are properly managed, Bismarck said.
The paper further noted that appropriate governance can ensure managerial independence, business focus and political accountability, as strong management teams will be needed to protect tax payers investment.
Further, the government should aim for a rapid exit from the companies whilst protecting investment value and should establish an independent process to manage ownership stakes, it added.
The working paper is part of WEF's new financial architecture project of the industry partnership programme and was mandated by the CEOs of the companies participating.
