Stock price is the indicator of the company management performance in the long term. The board and Executives are judged on the company stock performance. One major part of the executive compensation is linked to stock options. At a higher level market indexes are the barometers of the economic health of the country. In the similar fashion we should create different indexes to judge government performance. And government executives should be judged(and compensated) based on these indexes. At the same time investors can be benefited if the government perform well as the value of the index will grow in that case.
This has another dimension. Leave aside developing countries like India, even in the most matured countries like in the US government are not judged on a regular basis in some objective, measurable ways. Theoretically we have Freedom of Information but practically we don't have it. If introduced these set of indexes should help the people to track the performance of the elected government. This should also help in more prudent government allocation of Tax payer's money and increase the efficiency of the government executives.
We should have a Government Performance Index having different index components. Some of the components can be as follows:
1. Budget deficit reduction
2. Foreign debt control
3. Federal Expense/Investment ratio reduction.
4. Gini Index
5. National Security performance(military expenses vs. lives saved)
6. Happiness coefficient of the citizens
7. Health and Education performance
8. Level of corruption etc.
There can be some challenges in creating this kind of index due to the secretive nature of some government agencies. Many of the times we may not be able to accurately measure the performance of the military. Because of the confidential nature these departments do not disclose many of the investment or expense data. Another problem with generally military investments is that they do not have any tangible outputs or deliverable and hence it is difficult to calculate the efficiency of the system(this is also the root cause of many corruption). The index creators need to show innovation to solve these problems. They should not compromise on national security as well as should not ignore tracking of huge military expenses.