A transaction tax on financial instruments is very likely. This will raise revenue for governments and make shareholders behave more like owners. Shareholder failure to police risky management activities was largely due to the very short holding periods for equities. A suitably high transaction tax would force investors to hold shares for much longer periods and to engage management to control risk. This would reduce the need for governments to police risk-taking in corporations. What could be more laudable than a tax that turned everybody into Warren Buffett?
Saturday, 17 October 2009
Via Duncan, I came across the following para in this article.
A couple of points. Firstly, is it 'very likely'? I don't detect much of a groundswell of opinion behind this idea, right or wrong. But secondly, I do think if the 'shareholder as owner' thing is going to be effective then we probably do need to think about the financial incentives for staying put. The steady drumbeat from the mainstream institutional investor leadership is 'don't make us do this stuff'. And I don't actually see much point in mandating such behaviour (you might as well put your effort into regulating the companies, rather than forcing investors to provide oversight). But we could tilt the playing field a bit so that there was a bit more reason why shareholders might try and engage. And as I said t'other day, my own preference would be to positively incentivise holding for the long-term.