FULL OF BULL - excerpts from Chapter 5

Executive Traits Are a Revealing Investment Gauge

A critical part of the investment appraisal and company evaluation process is gauging management effectiveness, quality, character, and values. Surprisingly, this essential aspect is often disregarded by the Street, unconcerned with character differences among the companies it covers. In crucial moments when events panic investors and stocks nose dive, executives are usually temporarily incommunicado. The ultimate basis of a judgment call in those circumstances is whether management can be trusted. It also holds true over the longterm. Who would you rather invest in, trustworthy or cagey executives? You need to get a handle on executive values in companies where you have an investment.

The Classic Operator, Realist, and No-Nonsense Driver

This is another favorable executive style. These are typically chief operating officers. Sometimes they are chairman who succeed founders but still manage their company as operators rather than as magnetic, imaginative leaders. They are tough, organized, detailed, quick studies, decision makers, serious, hard-working, and unafraid to confront any senior executive. Steve Ballmer of Microsoft, and in the past Lou Gerstner of IBM, Ray Lane of Oracle, and Josh Westin of Automatic Data Processing are cases in point that I am familiar with. When Josh was head of ADP, he ran a tight ship. I remember when I was meeting with other executives at the headquarters, he requested to see me for five minutes. As I marched into his office, he stated his question would take one minute, that I'd have two minutes to respond, leaving two minutes for me to have one counter question and a reply. As I exited, a glimpse at my watch indicated I'd been there for exactly five minutes. Josh and his executives had computer mainframe print-out paper sliced into smaller pieces and stapled as scratch pads, and would write responses in long hand directly onto incoming letters and memos and send them back to save time and paper. That's how he ran the business.

Candor, Access

Executives gain credibility by being forthright, freely discussing negative cross currents and challenges. Access is critical, management must be open, available, and responsive to Wall Street and investors as opposed to being evasive or secretive.

Humble, Genuine

Company leaders should not be arrogant, no attitude or egos, minimal hype, and modest PR baloney. Firms in the Midwest, for example, seem to be more genuine. Executives should willingly admit mistakes and be willing to alter the course. No one�s perfect or invincible.

Dictator Surrounded by Yes-Men

CEOs or chairmen who are tyrannical dictators, sticking their noses in every detail, encircled by weak, wimpy yes-men, are likely to hit a brick wall. They can't be perfect, know everything, and always make correct decisions. They chase away real talent and effective leaders. The company outgrows them. Overly domineering autocrats create a vacuum in the management ranks.

Hype, Marketing, All Show

I am cautious when I see executives prominently featured in their own company advertising campaigns. Full-page ads and splashy airport billboards bother me. EDS ran a massive promotion and Super Bowl commercials, justifying the blitz as “air cover for the sales force.” That chairman was later replaced when things swooned. Guess the aerial attack wasn't enough. Carly Fiorina featured herself in Hewlett-Packard ads and was later dismissed by the board. Beware of over-the-top hype and executive-centered publicity.