The character of the people who manage the company you own will, in many ways, predict the quality of the investment you have made. We feature some of our favorite managements to help you in your search for great corporate leaders.
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Charles Schwab & Co.: No Fear Not only did Schwab take an immediate hit from a short-sighted Wall Street for deliberately threatening its own revenues, but it took the change one step further. Schwab eventually restructured the entire company, placing its online services at the heart of it all. At year-end 1995, Schwab had a market cap of $3.6 billion; today it is worth more than $40 billion. Nice gamble. -- Todd Lebor, TMF Teetime Enron: Visionary Action These guys recognized that Enron's expertise was in market making. They had been doing it for years with commodities such as natural gas and electricity -- why not bandwidth? They also capitalized on their rights-of-way easements along the nation's railroad tracks and built a nationwide fiber optic network of their own. Today, Enron claims to do $200-$300 million per day ($30 billion annually) in B2B e-commerce, making it the largest Internet commerce site on the planet. Not bad for a narrow-minded, tunnel-visioned utility, eh? -- Todd Lebor, TMF Teetime Starbucks: Knowing Your Brand Recently, Starbucks has taken this vision and turned it into a worldwide franchise, chalking up successes in such diverse cultures as the U.S., Japan, China, and even Kuwait. Most impressive to me is that Starbucks never deviated from the core Starbucks "experience," even in all of these different cultures. In fact, the company ignored most of the advice it received from consultants prior to entering the Japanese market because that advice was contrary to Starbucks' brand. The result was faster-than-expected profitability and stores three times busier than their North American counterparts. Starbucks' success in Japan shows how crucial it is to focus on the brand and consistently communicate that brand to all customers. More importantly, it shows how essential it is for management to trust their gut in the face of contrary advice. -- Bob Fredeen, TMF Bobdog eBay: Patience Is a Virtue eBay is also expanding internationally and into new businesses at its own pace. Management is learning in-depth about new markets before launching new sites, even if competitors are already in those markets. CEO Meg Whitman reminds investors, "This is a marathon, not a sprint." eBay is systematically building a long-term business. It is not following the latest fads, and it is expanding at a sustainable, smart, and internally controlled pace. -- Jeff Fischer, TMF Jeff Cisco Systems: A Deep Bench Over the past year, Cisco lost three of its top managers without skipping a beat. When its Chief Technology Officer left, there was a six-year veteran ready to step in and fill her shoes. The same thing happened when its Senior Vice President for the Enterprise Line of Business departed and was replaced by a 10-year veteran. Although it may take more than one person to fill the role, Cisco also should be able to overcome its most recent loss of number-two man Don Listwin, who went on to become the CEO of one of Cisco's business partners. Cisco CEO John Chambers already has people on hand who can step in and assume his responsibilities. -- Phil Weiss, TMF Grape
Charles Schwab the man and Charles Schwab (NYSE: SCH) the company should be recognized for a "no fear" attitude. Schwab and co-CEO, David Pottruck, displayed this attitude when they dropped online commissions to a third of phone- or live-broker-based commissions, even after they calculated that it would cost the company $125 million a year in foregone revenue. These men understood that the market was changing and they could be the first to change or the last. They chose wisely and catapulted their company to the top of the online brokerage industry, never to look back.
The jester cap comes off to Enron's (NYSE: ENE) management team for its visionary action. As I wrote in a December 2000 Rule Maker column, this former monopoly turned itself into one of the most dynamic and free-thinking organizations of the last decade, perhaps even the century. Led by CEO Kenneth Lay and COO Jeffrey Skilling, Enron, the second-largest operator of gas pipelines in the U.S., found itself making a market for the hottest commodity around -- bandwidth.
One of Starbucks' (Nasdaq: SBUX) greatest strengths is the management's focus on the Starbucks brand. Chairman and Chief Global Strategist Howard Schultz's vision is of a brand that represents quality coffee and friendly customer service, but more important, a location where people can get together, relax, and enjoy life. The stores were designed to convey this image, and it has been widely accepted in the U.S.
I admire management at eBay (Nasdaq: EBAY) because it is moving at its own efficient, but not rushed, pace in building its business. Also, eBay is not following the crowd, doing what all the other new online businesses are doing. In the fall of 1999, when literally dozens of new e-companies were advertising on television (blowing through their venture capital funding in the process), eBay didn't run any TV ads. More than a year later, in late 2000 -- when very few e-companies were advertising on TV -- eBay decided to finally test ads in some markets. Management stated that the benefit now was that eBay's ads would not get lost, because new companies were no longer advertising in droves.
When you buy the shares of a company intending to hold for the long term, you're saying that you believe management can execute and deliver on its business model. So, not only do you want a top-notch person leading the company, you also want to make sure that there are qualified people to fill in should anyone leave. Cisco System's (Nasdaq: CSCO) management team is one of the deepest you'll find.
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