June 3, 2009
Media Release - More Government Constraints on Saskatchewan's Commercial Crowns = Less Value Over Time
A new policy backgrounder from the Frontier Centre for Public Policy, authored by Sheldon Schwartz, identifies fundamental limitations on the operating and investment opportunities available to commercial Crown corporations.
Schwartz, a former assistant Deputy Minister of Finance and former Chief Financial Officer and Vice President of Finance and Administration for the Crown Investments Corporation points out that, compared to a comparable private company, Saskatchewan’s commercial Crowns find themselves with a number of significant constraints:
“To the extent public policy constraints on a commercial Crown corporation result in foregoing attractive investment opportunities and thus conflict with shareholder value maximization,” says Schwartz, “a commercial Crown corporation should be expected to be worth less over time than an otherwise identical publicly traded corporation that is not subject to such constraints.”
In some ways these characteristics are nothing new, commercial Crowns have always been different from private companies in that they are not only expected to be commercially successful, but also to fulfill certain public policy priorities. However with the differences properly articulated, it becomes clear that there is a tradeoff between maximizing the value of taxpayers’ investment and fulfilling public policy priorities.
Schwartz goes on to recommend that federal and provincial commercial Crowns be subjected to periodic public review to identify the public policy tradeoffs and to hold the government accountable. Such reviews should answer the following questions:
"Rather than ideology, the pragmatic public policy rationale that was the original impetus for establishing a commercial Crown corporation is the logical starting point for a rational evaluation of the desirability and necessity of continuing public ownership of what, after all, is a commercial investment, "writes Schwartz. "And as for emotion, as my mother has observed, you should never love something that can’t love you back."
The backgrounder, More Government Constraints = Less Value, can be found here
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About the Author:
The Frontier Centre for Public Policy
is an independent public policy think tank whose mission is "to broaden the debate on our future through public policy research and education and to explore positive changes within our public institutions that support economic growth and opportunity."