CEOs Must Bring Investors Along for the Ride (WSJ) [View article]
The collapse in corporate governance is another reason to be sceptical about long-term exposure to US equities. It is one of the main factors that have motivated me to cash-in gains in the recent rally, rather than hold more stocks for their long-term dividend income.
I believe any board of directors that considers the interest of its long-term shareholders would not permit any raises, bonuses, or options to executives when dividends to shareholders are cut; and only to restore executive raises, bonuses, or option grants when dividends are restored to prior levels.
Any board of directors that considers the interest of its long-term shareholders would fire executives who bring about great damage to their shareholders' investment by poor management decisions (witness what happened to shareholders of DOW, GE, PFE, MRK, just to name a few, and not to even mention the banks).
However, the reality is that our entitled class of managements and their crony boards govern our public corporations as though they, and not the shareholders, are the owners; and this should be considered as a discounting factor when evaluating US equities as an asset class.
Capitally Challenged Stocks That Could Be Diluted or Extinguished [View article]
This is an excellent article and a prudent view of current valuation metrics: (a) Balance Sheets Rule the Day. (b) Cash is King (c) Debt is Death.
Unfortunately, many of our largest companies are managed by overpaid incompetents supervised by ignorant and irresponsible boards, who have failed to think through the sobering reality your article brings to light. Thus, they continue to embark on debt-fueled, cash-wasting mergers, ignoring the obvious lessons of a de-leveraging world. Dow Chemical was first, and has thus managed to morph, miraculously, from a US corporate powerhouse into a zombie on life support. Pfizer, then Merck followed close on Dow's heels, in an astonishing display of foolishness.
The lesson I learnt in the past few months, is that one has to apply a "mismanagement discount" to stocks, since the probability of arrogant managers demolishing the value of perfectly excellent companies has to be added to the other uncertainties of this complex market climate.
(disclosure: unhappy owner of shares in Dow, Pfizer, and Merck)
CEOs Must Bring Investors Along for the Ride (WSJ) [View article]
I believe any board of directors that considers the interest of its long-term shareholders would not permit any raises, bonuses, or options to executives when dividends to shareholders are cut; and only to restore executive raises, bonuses, or option grants when dividends are restored to prior levels.
Any board of directors that considers the interest of its long-term shareholders would fire executives who bring about great damage to their shareholders' investment by poor management decisions (witness what happened to shareholders of DOW, GE, PFE, MRK, just to name a few, and not to even mention the banks).
However, the reality is that our entitled class of managements and their crony boards govern our public corporations as though they, and not the shareholders, are the owners; and this should be considered as a discounting factor when evaluating US equities as an asset class.
Capitally Challenged Stocks That Could Be Diluted or Extinguished [View article]
(a) Balance Sheets Rule the Day.
(b) Cash is King
(c) Debt is Death.
Unfortunately, many of our largest companies are managed by overpaid incompetents supervised by ignorant and irresponsible boards, who have failed to think through the sobering reality your article brings to light. Thus, they continue to embark on debt-fueled, cash-wasting mergers, ignoring the obvious lessons of a de-leveraging world. Dow Chemical was first, and has thus managed to morph, miraculously, from a US corporate powerhouse into a zombie on life support. Pfizer, then Merck followed close on Dow's heels, in an astonishing display of foolishness.
The lesson I learnt in the past few months, is that one has to apply a "mismanagement discount" to stocks, since the probability of arrogant managers demolishing the value of perfectly excellent companies has to be added to the other uncertainties of this complex market climate.
(disclosure: unhappy owner of shares in Dow, Pfizer, and Merck)