One of the toughest jobs we have as
investors is to choose a good management team to invest in. Picking
the jockey can be as important as picking the horse.
A Rule #1 investor does it with passionate, honest, self-effacing - people who are committed to the business over themselves. Think Steve Jobs at Apple. Well, except for the self-effacing part. So think the CEOs running virtually all of Buffett's private companies. They are all rich, but they keep working hard because they love their businesses.
A great example of a bad example is Rick Wagoner at GM. I've never met Rick. He played b-ball at Duke. Who knows, maybe I'd like him. Maybe he had issues at GM that no one could fix. I don't know.
What I do know is he failed the shareholders on a scale rarely seen in history. And it's not like he's new to the business: He was appointed the Chief Financial Officer in 1992. He's been at or near the top of the business now for 17 years. GM's problems must be laid at his feet. But why has it taken all these years to fire him? Didn't GM have a board of directors?
Phil Town Answers: No.
Not if by "Board of Directors" you mean a body of people who were representing the shareholders. GM's board (and many if not most Boards) are rubber stamp yes-men who are carefully selected by the CEO to be his allies.
The idea that the Board of a public company should hold the line on compensation, demand performance and generally be the watchdog for the interests of the owners is a fiction in most public companies.
Choose your businesses with the expectation that the board will not fix things if they break. Rely only on the current CEO and a heck of a Moat that will hold back the competitors until the ship rights itself.
Now go play.
