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The Management
Part 1: Key Factor for Long-Term Success of a Company
How good is the management really? Whenever it’s not just about raw numbers, pure analysis reaches its limits. A very personable and eloquent CEO may turn out to be inept in their field. Conversely, a reserved and somewhat unfriendly-seeming boss might actually be the perfect fit for the position. In other words, our gut feeling doesn’t always send the right signals.
The past: What remains is a careful look into the past. Previous responsibilities, annual reports, and forecasts made are helpful in the assessment. Interviews and newspaper articles also allow conclusions to be drawn about the credibility of the management.
Founder and boss at the same time? Be cautious!
While it is not uncommon for the founder of a company to also be (or remain) the CEO or chairman, it is more of an exception. Isolated, it is by no means a quality feature. Often, founders have their own ideas about the future of “their baby,” which may not necessarily be in the best interest of all shareholders. For example, Steve Jobs: Before the Apple founder returned to the company in 1997 and made it what it is today, he almost drove the same company to ruin 20 years earlier.
The Facts:
- The quality of management cannot be judged based on fixed criteria.
- How is the capital being used?
- What does the compensation look like?
- What is the dividend policy being pursued?
- Are forecasts being met?
- How is the communication with the shareholders?
Our Conclusion:
There are no rigid criteria for assessing the quality of management and particularly the CEO. Ultimately, it often comes down to how the available capital is used and whether the strategies are short or long-term. A high level of management involvement in the company should therefore be both an incentive and motivation. However, there are clear deficiencies that can be relatively easily uncovered. In the next issue, we will address which key figures bonuses should be based on.
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