It’s not just Bernie Madoff. The number of highly-placed public servants who have tax problems is more than overwhelming. It’s so bad that some say President Obama cannot find deputy and assistant treasurers to nominate to staff the Treasury Department. Many of the nominees cannot pass tax scrutiny, or they withdraw their names from consideration before an investigation begins. Some members of the political royalty of the country don’t simply have tax problems — they seem to be flat-out evaders.
Political kings and queensIt seems that us regular citizens have one set of tax standards — fairly harsh and stringent — and the political elite have different, friendlier ones. It’s not that the highly-placed folks don’t get caught (which happens, for example, when they don’t qualify for some government post), it’s more that they seem to be treated better for not paying taxes than the rest of us. Gee, it even turns out that the speaker of the house in my state has a tax problem, too. Is there a politician who doesn’t? If you were in high office, wouldn’t you make every effort to bend over backwards to make sure your taxes were in order?
Corporate royaltyThe politicos are not alone. We have the CEO class as well. These guys and gals — and boards of directors that employ them — are so removed from reality that they think $100 million bonuses make sense, even though, by some estimates, such outrageous pay levels cost companies a fair percentage of earnings. For example, it’s said that Home Depot paid its former CEO, Bob Nardelli, $210 million just to leave (he’s now at Chrysler). If you look at Home Depot’s net earnings, it’s about 7.5% of all the money it made in 2006. Nardelli made around $29 million in 2005, which, believe it or not, put him 56th from the checkered flag on the Fortune 500 CEO pay list that year. He received more than $360 million for six years at Home Depot, and compensation at such levels has a material effect on the earnings of a company and/or the dividends paid to shareholders.
Boards of directors are supposed to protect shareholders by creating executive pay scales that are tied to the profitability of the company and improvements in the value of shares. Instead, all too often, boards are packed with friends of the CEOs. This club of buddies plays a game of mutual reward, shareholders be damned. An exception to this dance around ethics is Berkshire Hathaway, which pays fair compensation (not excessive) and ties executive rewards to improvement in earnings and share values.
The president of the United States receives $400,000 a year for being the CEO of the entire country, although perks include a nice home and airplane. On the other hand, CEOs of Fortune 500 companies averaged $10.8 million in 2007, compared to $29,544 for the average worker, according to the 4th annual CEO compensation report by the liberal Institute of Policy Studies and the non-partisan group United for a Fair Economy.
It seems to me that the powerful politicians and corporate executives in the world have become completely insulated from the real world; from the rest of us. I sometimes think the self-exalted don’t have a clue how annoyed the rest of us are about their cavalier behavior. Is all this excess reminiscent of the French Revolution? Maybe it’s true that those who forget history are condemned to repeat it; our own elected and corporate crowned heads certainly seem to have forgotten the past. When the financial crisis ends and the dust settles, they may not be guillotined, but many may no longer have careers or the respect of our citizens.
Paying attentionWhat’s the point? When investing for customers or for yourself, pay attention to the prospects for the company (wide moat to protect against imitators, good present and projected earnings, manageable debt), to its board of directors (are they independent, or rubber stamp buddies?), and to executive compensation (is it reasonable and tied to performance?).
If you can’t find anything that meets the criteria, you might check Berkshire Hathaway’s Class B stock (BRK.B). Below $3,000 per share, it might be a steal (the closing price March 20th was $2,753). And if you are feeling really optimistic (and flush), buy a share of Berkshire’s Class A stock (BRK.A), which closed at $84,574 on March 20.
At least with Berkshire, you’ll know that your money won’t be just helping to excessively pad the pockets of its executives.
Broker’s BookcaseBuilding a Winning Sales Force: Powerful Strategies for Driving High Performance by Andris A. Zolners, Prabhankant Sinha and Sally E. Lorimar (AMACOM Books; March 2009). Messrs. Zolners and Sinha are college professors, and Ms. Lorimar is a business writer and consultant — all are sales force strategy and effectiveness experts, who have both practical hands-on boardroom and academic
experience.
You may or may not be interested in building a sales force. Even if you have no interest, it might be worthwhile to understand the processes, and relate them to yourself. In the pages of
Building, you can learn about greedy cultures. Insurance brokerage giant Marsh & McLennan’s Marsh Inc. unit, for example, cheated customers out of fair prices by rigging the deals so that it maximized its own commissions, a no-no for brokerages.
This statement resonated with me: “Too often, companies underestimate the importance of differences in opportunity when they evaluate the performance of their salespeople.” In other words, a wholesaler who has California as their territory might have a better opportunity than another who was assigned to Oklahoma or Arkansas.
Building is chockablock full of the nuts and bolts of sales management — it is extraordinarily practical and highly readable. If you are building a sales organization or are a salesperson, it’s a must-read.
*****
Lead Domination — 21 Proven Strategies for Effectively Generating Leads and Converting Leads into Sales by Jamie Klein (Lore Institute Publishing, San Clemente, 2009). It’s a jungle in there. No, really: A lioness is your guide to learning how to deal with leads. The author is oriented toward teams and companies, but that’s okay — Lead Domination is about how to stay in the business of growing leads, and that serves us all, individual or group.
Isn’t it strange that we focus on so many things — investments, insurance, software and more — and yet we don’t focus much on the one thing that makes everything else happen? Klein’s premise is that we all need to become lead experts. This is a man who has been working on leads for 30 years, and the reader can’t help but learn things by reading his worthwhile book. Did you know that while major companies can create and process thousands of leads, only about 20% are followed-up on? How does this compare with your own system? I am embarrassed to report that I probably am worse than average.
The point of
Lead Domination is that we are either going to control our leads and make them successful, or they will control us and the process will be unsuccessful. Jamie Klein has produced a book that is clearly a labor of love, and it is nicely illustrated by Bruce Higdon.
Readers may write to Richard Hoe at Richard Hoe Investments, LLC, 7134 South Yale Avenue, Suite 560, Tulsa, OK 74136, or email him at richardhoe@richardhoe.com. Mr. Hoe has been an investment professional for 40 years, and is a registered representative and investment advisor representative. He has been writing professionally for more than 50 years, and is a member of the adjunct faculty at the California Institute of Finance, a graduate school at California Lutheran University that offers an MBA in financial planning. He holds five designations, including, Chartered Financial Consultant, Chartered Life Underwriter and Accredited Estate Planner.This information is intended for financial professionals only, not the general public. This is not a solicitation to buy or sell any specific security. Mr. Hoe may have positions in the securities or other investments discussed.