Punishing your captive shareholders

Although public companies are not as accountable as they should be, in the long run failure or malfeasance has consequences. Managers who treat shareholders badly get fired, or people dump the shares — depressing them enough to bring in a raider who will shake things up.

Unfortunately, nothing like that happens when it comes to accountability in government agencies, as this week’s semi-shutdown makes clear.

The Office of Personnel Management (an Executive Branch agency) encouraged agencies to shut off their websites when the shutdown came. The Census Department, NASA and Park Service are offline, although the Library of Congress and IRS (despite previous threats) are still functioning. Julian Sanchez of the Cato Institute referred to this as an online “Washington Monument Syndrome.”

For anyone who’s run a business and is IT literate knows that it costs more money to take down a site than to leave it up. How many sites have you seen that haven’t been updated in weeks, months or even years? For many sites, the government could be shut down for 3 or 6 months and the content would still be available and useful if they left the servers running.

At Reason, Brian Doherty notes the irrationality of this approach:

If the “inessential” public-facing Web pages are hosted on the same systems you’ve got to keep up and running for other “essential” back-end purposes—meaning you don’t get to save the security or electricity overhead— then the cost of having IT go through and disable public access to the “inessential” sites could easily be higher than any marginal cost of actually serving the content. But the guidance here seems to require agencies to pull down “inessential” public-facing content even when this requires spending more money than leaving it up would. In the extreme case, you get the bizarre solution implemented on the FTC site: serve the content, then prevent the user from seeing it!

Or, as my local paper quoted one expert:

To many, the website shutdowns have the feel of politics. Public relations expert Erica Holloway of Galvanized Strategies, who works with clients on their websites, said it makes no sense to shut down the sites otherwise.

“To withhold information from the public that the public has a right to have is wrong,” Holloway said. “And if there is no budgetary reason behind it, if it isn’t monetary, then it looks like what it is: A giant temper tantrum.”

But since the tantrum included hiring people to put up barricades at the World War II memorial —“to make life as difficult for people as we can” — I guess we shouldn’t be surprised.

In a parliamentary system such as our European friends enjoy, such tantrums have consequences: it's hard to imagine David Cameron or Andrea Merkel pulling such a stunt. But with a fixed-term (and term limited) executive such as in the US or Mexico, it’s apparently feasible (if not desirable) to punish one’s shareholders.