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Re: Re: Re: [sharechat] WRI

From: Brian Gale <>
Date: Sun, 29 Oct 2000 15:01:45 +1300

Thanks for those comments Steve - they follow my own line of thinking.

  I believe NZ companies, by and large, face very difficult economic and 
trading conditions which would test even the most brilliant 
personnel.  After all we surely can't come to the conclusion that the 
majority of NZ executives are dummies, can we ?

  It is a trend to look for a ' fall guy ' like when the All Blacks lose a 
game, other factors, like the skill of the opposition, don't warrant 
consideration - heads must roll. Its the easy way to vent one's disappointment.


At 13:05 29-10-00 +1300, you wrote:
>Brian wrote: "...I have difficulty in attributing the ' destruction of 
>shareholder wealth'  solely to the remuneration of their executives..."
>Thats a good comment Brian. The performance of a company must have a lot 
>to do with the type of business it's in, and a better indication of 
>management ability to create shareholder wealth (or minimise loss) is to 
>compare it to its peers within an industry.
>Depending on that industry a company may be subject to factors beyond its 
>control, effectively limiting the best efforts of management strategy and 
>Buffett says of management: "Economic strength is most often found in 
>franchises. One strength is the potential to freely raise prices and earn 
>high rates on invested capital. Another is the ability to survive economic 
>mishaps and still endure. It is comforting, Buffet says, to be in a 
>business where mistakes can be made and still above average returns can be 
>achieved. "Franchises," he tells us, "can tolerate mismanagement. Inept 
>managers may diminish a franchise's profitability, but they cannot inflict 
>mortal damage."
>"A franchise can survive inept management; a commodity business cannot".
>[From "The Warren Buffett way"]
>If remuneration of executives and management gets out of hand it could be 
>a symptom of a greater problem within the business itself and will likely 
>harm shareholder returns.
>At the same time these remuneration schemes are designed to make 
>management think more like owners and increase the returns for all 
>Rising costs and corporate excesses are often a symptom of misallocation 
>and mismanagement of capital on a larger scale. Hard to believe that BIL 
>once had a 22 seat Falcon 900 bizjet to buzz around in!

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