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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (15111)8/9/2002 7:50:35 PM
From: Don Earl  Read Replies (3) of 78763
 
Paul,

<<<And the first two picks this year too have just been disasters. (MIR and ELN).>>>

Speaking of MIR, I ran across this and thought it was interesting:

forbes.com

I've seen other posters mention avoiding companies where compensation appears excessive. The article is more than a little interesting as it tends show a relationship between the place where the fiduciary duty to shareholders departs in relation to greedy compensation. As a rule of thumb I shy away from companies where the top executive makes over $400K for a small cap, $800K for a mid cap, and $1.5M for a large cap. IMO, those seem to be the thresholds where the incentive to run scams outweigh the incentive to run businesses. I guess I figure if a chief executive has managed to acquire a lifestyle requiring much more than that, he doesn't have a lot of time left over to spend at the office. I've seen cases where compensation for the top 5 executives amounts to over .50 per share per year which severely limits the upside potential of the stock. Also, whenever these companies restructure, it's always from the bottom up (where most of the productions and customer service is done) instead of the top down. The last executive I saw offer to take a pay cut to control expenses was Marc Andressen back around 1997 when Netscape was getting clobbered. I won't hold my breath waiting for the next one. These days I tend to assume most of them will need the extra cash to cover the cost of bribes and O. J. Simpson defense attorneys.
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