Carl, Would strongly encourage you to read Warren Buffett's recent annual letter to shareholders.
berkshirehathaway.com
Here's a snippet:
"Corporate Governance
Both the ability and fidelity of managers have long needed monitoring. Indeed, nearly 2,000 years
ago, Jesus Christ addressed this subject, speaking (Luke 16:2) approvingly of “a certain rich man” who told
his manager, “Give an account of thy stewardship; for thou mayest no longer be steward.”
Accountability and stewardship withered in the last decade, becoming qualities deemed of little
importance by those caught up in the Great Bubble. As stock prices went up, the behavioral norms of
managers went down. By the late ’90s, as a result, CEOs who traveled the high road did not encounter heavy
traffic.
Most CEOs, it should be noted, are men and women you would be happy to have as trustees for your
children’s assets or as next-door neighbors. Too many of these people, however, have in recent years
behaved badly at the office, fudging numbers and drawing obscene pay for mediocre business achievements.
These otherwise decent people simply followed the career path of Mae West: “I was Snow White but I
drifted.”
In theory, corporate boards should have prevented this deterioration of conduct. I last wrote about
the responsibilities of directors in the 1993 annual report. (We will send you a copy of this discussion on
request, or you may read it on the Internet in the Corporate Governance section of the 1993 letter.) There, I
said that directors “should behave as if there was a single absentee owner, whose long-term interest they
should try to further in all proper ways.” This means that directors must get rid of a manager who is mediocre
or worse, no matter how likable he may be. Directors must react as did the chorus-girl bride of an 85-yearold
multimillionaire when he asked whether she would love him if he lost his money. “Of course,” the young
beauty replied, “I would miss you, but I would still love you.”
In the 1993 annual report, I also said directors had another job: “If able but greedy managers overreach
and try to dip too deeply into the shareholders’ pockets, directors must slap their hands.” Since I wrote
that, over-reaching has become common but few hands have been slapped.
Why have intelligent and decent directors failed so miserably? The answer lies not in inadequate
laws – it’s always been clear that directors are obligated to represent the interests of shareholders – but rather
in what I’d call “boardroom atmosphere.”"
Inner Circle Lunch Bunch = “boardroom atmosphere.”"
More great stuff in there on options grants, greedy managemnt behaviour, etc...
Note that Berkshire Hathaway just recorded $4.2 B in profits in 2002. What was Buffett's 2002 annual gross salary? $100,000. How many options did he get? None.
Moved my funds from Intel to Berkshire about three years ago. Very glad I did. |
