Everyone knows where I was Sunday the 11th, where the idea for this week’s blog germinated, right? Right. I was at Borders, digesting Barron’s.
Monday’s edition of Barron’s usually hits my mailbox on Saturday morning — my guess is that it’s printed in Dallas and mailed to Tulsa on Fridays, maybe late at night? This week’s issue was/is especially rich. One may find in its pages a quarterly listing of fund results by Lipper, and lots of good and not-so-good investment ideas.
Among the news, information and current (and estimated for the future) prices of stock, came a bit about how much yearly gold the nutty mental midgets of Wall Street take from their companies. Ye gods: as a value-oriented, executives-work-for-the-shareholders kind of guy, the info made my blood run cold.
The employees at Goldman Sachs (there’s a reason, I guess, that Gold, yes, with a capital G, is in the name) managed to pay themselves 36% of revenues in 2009. I’m sure it would have been more, since it was 49% in 2008, had not the government shown outrage this year at 2009 “executive bonuses.” Note that “revenues” word, meaning all the money the firm took in before taxes, expenses and all that other nuisance stuff that businesses pay each year were considered.
You think that’s bad? Lazard had a whopping distribution of 80% of revenues. Morgan Stanley? A handsome 62%, government protestations be damned.
One of the precepts of investing is that — before ponying-up one sou to invest in any corporate stock — you investigate to see how a company’s execs are compensated. That’s part of the process of due diligence. I don’t think I would invest a nickel in any company that paid as much out as the financials, would you?
I understand about capitalism and all, and I really don’t think it’s the government’s business how much the execs make in any company, but I do think it is the stockholders’ business. Stockholders who allow that kind of compensation are in a real sense giving money to executives. I consider that the executives are using dividends that should be paid to stockholders as compensation to themselves.
It’s shameful. It’s nuts. The real crazies, though, are the folks who invest in such companies.
Have a great week!
Check out more blog entries from Richard Hoe.