sometimes the environment also us the community also us or anything else Here

Sometimes the environment also us the community also

This preview shows page 81 - 84 out of 263 pages.

sometimes), the environment (also us), the community (also us), or anything else. Here are some ways to spot traitors: • They pay themselves a ridiculous amount of money: When I started investing in 1980, the average CEO compensation for public companies was about 40 times the lowest-paid employee in their business. If the lowest guy on the totem pole made $30,000, the CEO made about $1.2 million. Today that ratio is up to 500 times, or a CEO salary of $15
Image of page 81
million. I wouldn’t trust my financial future to a CEO who plays like that. (Note: In 1993 Congress passed a law limiting CEO pay to $1M. Anything more than that had to be incentive-based or it wasn’t deductible as an expense. The unexpected consequence of their meddling was to encourage CEOs to take large stock options as “incentive” pay. This led directly to CEOs manipulating the option dates to maximize their compensation, manipulating the stock price with manipulated earnings, and finding other ways to max out those options. And that is what led to the massive disparity between paychecks. We need to get rid of income tax codes so Congress isn’t tempted to mess with the marketplace. Check out our website for information on a very interesting alternative that over a hundred congressmen already support.) • They set up a golden parachute so if you fire them they get paid off massively. What kind of employee can do a crappy job, get fired, and make out like a bandit? Only a CEO or someone who has pictures of somebody on the board doing something they shouldn’t have been doing. This is just so wrong on so many levels. And CEOs wonder why employees want unions? • They treat company assets like their own and use business assets for nonbusiness. One CEO I know sent the company-paid Gulfstream jet to pick up a board member on the East Coast and fly him, by himself, out west to go on a hunting trip. The hunting trip and the jet were paid for by the company owners. What right does the officer of a corporation have to take money out of the stockholder’s pocket? If I owned that company I’d be furious the CEO just ripped me off for $60,000 for the flight and another $20,000 for the hunting trip. That’s my money, you traitor! What are you doing spending it like that? (Actually what he was doing was schmoozing a key member of the CEO compensation committee. Hmmmm. I wonder why?) • They buy other businesses to make a bigger business rather than a better business. Watch what’s happening with ROIC. If the CEO is stockpiling businesses and the ROIC is going down, then the CEO might be creating an empire with a lot of sales and a terrible return on invested capital. Well, the capital he invested badly is my money! I don’t want him to buy things just to get so big that he “needs” a big private jet for his outsized ego. He only should buy things if the return on the
Image of page 82
investment is excellent. If he isn’t going to acquire a business with a great return, I want my money out so I can invest it properly.
Image of page 83
Image of page 84

You've reached the end of your free preview.

Want to read all 263 pages?

  • Spring '20
  • Warren Buffett

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors