"Privatisation of what?"
Exactly! Everything by the looks of it.
But in the case of Thames wate,. The rsilways etc.. then why is it beneficial to enrich shareholders rather than invest in infrastructure? |
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"Privatisation of what?
Exactly! Everything by the looks of it.
But in the case of Thames wate,. The rsilways etc.. then why is it beneficial to enrich shareholders rather than invest in infrastructure?"
Being beneficial to share holders and investing in infrastructure are not mutually exclusive. If there is enough competition, businesses will be forced to invest in infrastructure to be more efficient. But it's hard to get the competition going in some utilities like water. So yes, your criticism is valid for very few businesses. But not for most of the businesses. |
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"Privatisation of what?
Exactly! Everything by the looks of it.
But in the case of Thames wate,. The rsilways etc.. then why is it beneficial to enrich shareholders rather than invest in infrastructure?"
Because if you don't, the shareholders will sell their shares en masse and take their funds elsewhere. They might sell them to an investor group which now has a say in the running of the company. The investor group's objectives might be quite at odds with the company and they could, if they have enough control, make decisions which harm the company and its infrastructure. |
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"Privatisation of what?
Exactly! Everything by the looks of it.
But in the case of Thames wate,. The rsilways etc.. then why is it beneficial to enrich shareholders rather than invest in infrastructure?
Because if you don't, the shareholders will sell their shares en masse and take their funds elsewhere. They might sell them to an investor group which now has a say in the running of the company. The investor group's objectives might be quite at odds with the company and they could, if they have enough control, make decisions which harm the company and its infrastructure."
And therein lies the dilemma of public or private ownership in that there is always the desire to reward investors to the maximum and that means investment in capital projects such as new sewage treatment works gets kicked down the road ignoring the fact that there is a potential for huge legal liabilities in the future
I know it’s not glamorous but surely some of the big pension funds would be better off if there was a two tier system whereby utilities would produce returns within a limited band width to investors leading to a steady market in these areas while still allowing investment in more volatile market areas. I imagine that there would be some stagnation in a market like this but then maybe that’s no bad thing? |
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