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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Coca-Cola: A Strong Board of Directors A strong and experienced board of directors is necessary to keep the CEO and president accountable for their decisions. Recently, when Coke's management tried to buy Quaker Oats, Warren Buffett stepped in and rejected the deal. This showed me that he has no problem stepping up to the plate when he disagrees with management. Lucent Technologies (NYSE: LU) is an example of a company with a very weak board of directors. Lucent's directors allowed management to get away with some very questionable decisions regarding purchases that were very dilutive to the shareholders and turned out to be disastrous for the company. So, the lesson I hope everyone will take away from this is to pay attention to the board of directors. -- Peter Psaras, TMF Mycroft Siebel Systems: Forging a Value Chain Strategic alliances are pacts that allow a firm to develop a leadership position, and a leadership position only. Second place in technology markets means only that you are the first loser, and Siebel understands this very well. Siebel's ecosystem includes more than 600 companies through which Siebel conducts joint marketing, selling, training, customer service, and a host of other activities. Many of these companies are leaders in technology and system integration, such as IBM (NYSE: IBM) and PriceWaterhouseCoopers. As a result of its extensive partnerships, Siebel has captured the dominant market share and mind share in the rapidly growing CRM sector. -- John Del Vecchio, TMF Fuz Oracle Corporation: Reinventing the Business Ellison's innovation is primarily responsible for Oracle's success thus far. He saw an opportunity to create a single product that could compete in multiple software segments and seized it. He saw an opportunity to leverage Oracle's existing database business and gain traction in the B2B e-commerce market and seized it. In a Silicon Valley second, Ellison had put Oracle through the spin cycle. The client/server application days were done and the Internet was driving its products. When technology takes the next sharp turn, it's a safe bet that he'll be directing traffic. Entering new businesses and reinventing products are what Ellison does best. -- Mike Trigg, TMF Tonto Yahoo!: Clarity of Focus One of Yahoo! CEO Tim Koogle's oft-repeated pearls of management wisdom is the constant striving to "get real clear on what we want to accomplish, and then communicate that clearly to every person in the company." While Yahoo!'s stock is currently suffering along with the rest of the dot-com crowd, Yahoo!'s clarity of focus will ensure that this company emerges with an even stronger claim to the eyeballs and, eventually, the wallets of Web users the world over. -- Zeke Ashton, TMF Centaur Berkshire Hathaway: Honesty and Integrity Moreover, Buffett makes the effort every year in the company's annual report to explain the business to shareholders, and any poor performance is highlighted rather than swept under the rug. In short, Berkshire Hathaway investors are treated with the respect that one would accord partners in the business. In today's world of restating revenues, shareholder lawsuits, and creative accounting, being a Berkshire Hathaway shareholder means being able to trust in a management that operates with integrity. -- Zeke Ashton, TMF Centaur
I love to see a very strong and respected board of directors in a company I am thinking of investing in. In my opinion, no company has a stronger board than Coca-Cola (NYSE: KO). Just the presence of respected investors and leaders like Warren Buffett and Sam Nunn speaks volumes.
Siebel Systems (Nasdaq: SEBL) has ascended to dominance in the customer relationship management (CRM) software market by forging a strong value chain of partners. Tom Siebel often refers to the "Siebel ecosystem," an indication that Siebel is in tune with the competitive environment of the new millennium. "Co-opetition," or an ecosystem of companies that can deliver their own comparative advantages to the whole product, is often far more productive and profitable than cutthroat competition.
Several years ago, Oracle's (Nasdaq: ORCL) database and enterprise resource planning application sales were slowing. CEO Larry Ellison identified the Internet, not the PC, as the single greatest investment opportunity the technology industry had ever seen. He responded by reinventing all of Oracle's existing products and developing a full suite of software applications that allow businesses to run all of their operations, internally and externally, over the Web. He took further action by recognizing the tremendous opportunities in B2B e-commerce. Oracle's strategy has been successful thus far, moving into business segments where competitive advantages exist. It continues to increase application sales and as B2B and online exchanges continue to grow, Oracle will leverage existing database clients toward new products.
When looking at Yahoo! (Nasdaq: YHOO) as a business, one strength of the company's management is their clarity of focus. In other words, they know what business they are in and what businesses they should be in. Just as important, they know what businesses they don't want to be in. They have resisted all temptations to grow their business in ways that don't necessarily contribute to their company's vision of "connecting anyone, anywhere, with anybody or anything."
One reason that I am a shareholder in Berkshire Hathaway (NYSE: BRK.B) is the integrity and honesty of the company's management. Warren Buffett and Charlie Munger always tell it like it is, and always provide investors in the company "the same amount of information we would like if our positions were reversed." One very impressive recent example of this is the fact that Buffett waited to inform shareholders of the company's financial results before announcing that the company would be buying back stock at a certain price. This ensured that no shareholder would sell their shares back to Berkshire without the benefit of the most recent information.
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