Forum Archive Index - May 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Barrel Scraper,

> 
> 
> Interesting though the whole exec renume thing.
> 
> Personally - I am happy for the exec to pocket exorbitant amounts of
> money/ Options / Whatever....But it still has to be earned.......
> consider this, What price would one give an exec that could
> consistently double the companies share price over a five year 
> period?   A person like that ya would just have to rate.. 
>
>

I'd like to turn that question about and ask:

What makes you think that just because a company's share price 
doubles every five years that such success should be mostly rewarded 
by stuffing the pockets of the person at the helm?

I am sure that there are some chief executives for whom the bulging of 
their pockets is well deserved.    However, for any outstandingly 
successful organization of reasonable size,  I feel that the contribution 
of the second and third tiers of management are often under-rewarded 
compared to the chief exec.

>
>
>Couple of questions ,
> Any favourite execs out there ? Do you think  "Back the winning
> Jockey" is an interesting investment strategy to propose? To start the
> ball rolling..I read a Ronald Brierly book that first started my
> interest in the Stock Exchange and all things business....$$ and it
> must be time to swot up on Dr Deanes current performance.. 
> or has he retired ?  :-) 
>
>

No Dr Deane has not retired, and it must be remembered that Dr 
Deane was the principal driver behind Telecom's so far embarrassing 
foray into AAPT in Australia - not Theresa Gattung.  That is a fact that I 
think should be kept in the limelight.

I know some people do follow their favourite executives.   I guess some 
feel they are a better judge of people than of financial facts.   I'm not 
going to say that 'following the man' is a bad strategy either.  But it is 
not one I choose to take.   As an example as to why I stay clear of this 
strategy, take the case of Jon Hartley.

In 1998 Jon was chief executive of Brierley Investments and the heir 
apparent chairman to Sky City.    Since that time the performance of 
the former has been disastrous and the latter stellar.  How do you 
explain that?    Was Hartley a gross underperformer at BRY, who 
suddenly acquired superman like performance the minute he walked 
through the Sky City door?   You could make the same argument 
against Patsy Reddy who was involved with both companies at senior 
level at that time.

Then we have the case of Sir Selwyn Cushing , the last chief executive 
of ECNZ who forecast the structural problems we experience today in 
the way the deregulated power market was designed.   Looks like he 
has been proved right, yet in his subsequent business dealings 
particularly involving Air New Zealand have proved disastrous.

Then there was the case of Ron Brierley himself who had to be 
removed as chairman of the BNZ.    Yet somehow despite his 
'incompetance', he seems to have made a success of GPG.

I'd be very interested to hear from anyone who has made a 'follow the 
man' philosophy work for them.   But my personal experience is that 
adopting such a philosophy is far too risky.

Having said that there is one company that I do hold because I really 
rate the management.  This is CHH.   I am really impressed with the 
'thinking outside the square' culture that seems to be seeded within 
this outfit.  Splitting one very large business into a series of 
autonomous business units and nurturing new business ventures 
within the Carter Holt corporate umbrella is I think a master stroke.   
They have even challenged the accepted practice of how often and 
when to prune their trees.   All this makes their lumbering opposition 
Fletcher Forests look a very second rate outfit.  

However I am sorry to report my faith in CHH management has not 
been rewarded in any investment sense :-(

>
>
>Anyway - that was just a few thoughts while digesting
> Burger King.. hmm, wonder whats happening with Restaurant >Brands.....
> 
> 


The way the share price has been bouncing around over the last year 
you might think a lot.  But if you look at the underlying management 
performance I don't have any disagreement with the way the business 
is being managed.  The main problem I have with RBD is that there is 
always a lot of marketing spin when the results are announced.   But 
you can learn to wade through that.

SNOOPY

disclosure: hold RBD



--
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