Posted on Mon 10 July 2017

a general solution to a general problem

We have a general problem in this country, and I think we could use a general solution to solve it.

Health care, Internet carriers (and the wired and wireless telecom which is a smaller part of it), electrical and water utilities, banks - possibly others — should not be for-profit corporations. They have too much incentive to bleed the citizens that they ostensibly serve. Nor does a pure charitable foundation work well for this. They tend to be either moribund or driven by charismatic leaders with a succession problem.

Let’s create an intermediate category called “tightly regulated businesses”. (I know, they think that they already are.) A TRB will have a specific and unusual charter: it cannot diversify holdings, it cannot purchase competitors who are still solvent, and rather than having a purpose such as “ensure the best return for investors” it has a target profit rate of 4%.

(Why 4%? Historically, that’s high enough to be attractive to long-term investors, but not high enough to be interesting to gamblers. I’m not committed to it in particular, but I think that it should certainly be between 2 and 6%.)

If a TRB has excess profits at the end of a fiscal year, they are distributed to customers as a credit on their next bill. All accounting is open to public scrutiny. No advantage to competitors will accrue from this, because all their competitors will also be TRBs.

A TRB’s corporate governance includes a board of directors where 50% are appointed by stockholders, 30% are senior technical experts in a related field — engineering, medicine, technology as appropriate — and 20% are appointed by the communities being served. There should be strict limits against interlocking directorates and revolving-door systems.

The aim of a TRB program is long-term stability. They provide necessary services that are most efficiently handled in monopoly or near-monopoly structures. They serve their customers more than their shareholders, but they provide an incentive for conservative investors. They are not exciting, but they should be reliable.

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