MICHEL PIREU: Assessing managers is more art than science for shareholders
You have ploughed a packet into a company, but how much can you trust the management?
Company management is supposed to act and think like the owners of the company. Unfortunately, that’s not always the case. Assessing the quality of management, in particular the extent to which they can be trusted to put shareholders’ interests above their own, is more an art than a science, and each investor has to find his or her own way of doing so. For some, seeing the CEO is a must. Others settle for a phone call, and yet others don’t feel any need to talk to anyone as the company’s performance will eventually tell them all they need to know. But assessing management through their results takes a while and by the time suspicions are confirmed, it’s often too late. On the other hand, as Simon Taylor of Judge Business School wrote in a letter to the Financial Times: "Investors may claim that they learn something more subtle than actual facts from the CEO’s tone or demeanour, but it’s unlikely. Perhaps those with advanced psychological training or with a background in the CIA or M...
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