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post #10666 of 11190
Quote:
Originally Posted by MSchapiro View Post

The board made the correct decision for the company given the bad press, but I consider it a poor decision industry wise. It also continues a trend of increasing government power and authority, which I am not sure is a positive thing in the long run.

It is correct that CEOs already asked for that and this has reinforced that logic. That said I consider this situation different because of the narrative that was spun and the circumstances.
This situation:
1. Essentially made no material profit for WFC. 
2. Was a sales program well below the executive level 
3. Stumpf has performed well during his time as CEO
4. WFC immediately cooperated when this was discovered. To my knowledge they were the ones who turned it over, it was not discovered by the government first. 
5. Due to 1 & 2 it's hard to imagine a scenario where this was intentional on the part of the WFC executive team

So while I don't disagree that CEO will ultimately bear responsibility or may potentially be forced to fall on their sword if the company takes a black eye, I wouldn't expect it for a paper cut. 

The idea that a scandal of any magnitude will result in your dismissal is a new paradigm. Jamie Diamond wasn't let go for the London Whale fiasco, in which not only was there a far stronger case for his termination, but he made the situation worse by his actions when he publicly announced the position and all the hedgefunds took the opposite position. 
I understand where you're coming from, but I think you're still conflating what's "fair" to Stumpf with what's good corporate policy. You can call it a "papercut", but I'd suggest that's highly, highly disingenuous. The damage to the brand is far more than a papercut, or at least could be if the bleeding isn't staunched quickly, whatever the materiality or lack thereof from an accounting standpoint of the actual transactions involved. And while I fully acknowledge it's easy to play Monday morning quarterback, it doesn't exactly seem like Stumpf has done a masterful job of managing the crisis, however it arose.
post #10667 of 11190
Quote:
Originally Posted by lawyerdad View Post


I understand where you're coming from, but I think you're still conflating what's "fair" to Stumpf with what's good corporate policy. You can call it a "papercut", but I'd suggest that's highly, highly disingenuous. The damage to the brand is far more than a papercut, or at least could be if the bleeding isn't staunched quickly, whatever the materiality or lack thereof from an accounting standpoint of the actual transactions involved. And while I fully acknowledge it's easy to play Monday morning quarterback, it doesn't exactly seem like Stumpf has done a masterful job of managing the crisis, however it arose.

I think you're misunderstanding my point here, which is long term vs short term incentives. 

 

I don't so much as care what is fair to Stumpf as the broader implications. Good short term policy was getting rid of him. I think it makes for poor longer term policy because of the reasons I previously laid out. 

 

The name of the game these days is simple to duck and cover when the government targets you due to the large fees they can levy combined with an ill informed and easy to anger public. Senators are blatently willing to manipulate the facts to suit their agenda and rally the public (WFC's stock price increased because of this scandal). The thinking is that letting these things pass so that business can get back to normal is the fastest way to resolve these issues. Especially given the risk if they aren't handled well. Keeping Stumpf would essentially allow the paper cut to keep bleeding.

 

That said, on a systematic basis I think this is the wrong response for the industries, even if it is best for the individual companies. Buckling under this pressure is going to lead to increased regulation, a more aggressive government and negative sentiment in the future. Companies would be better off standing their ground. 

post #10668 of 11190

That said, acknowledging some counter points to my arguments, WFC has always been known for their fairly wholesome brand and this behavior may change under another administration (although I wouldn't expect it to under the two current candidates). 

post #10669 of 11190
Fair. I suspect we may have different baseline assumptions about the depth of the CEO talent pool. Just as a CEO can't prevent every bad thing that might happen, he or she can't honestly take credit for many of the good things that happen. Right place, right time. Leave aside founder CEO's for a minute, who I think are sort of a different animal. I'm just not starting from the assumption that Stumpf's (or many other public company CEOs) necessarily dramatically better at being the CEO of Wells Fargo than whoever the next in line might be. I think the talent pool is deeper than that. Given that, I don't really see the great cost of what you see as a long term policy mistake.

I'm pretty sure Senators were always willing to manipulate fact, back to the glory days of Rome. Sure, good PR and bad PR both travel more quickly and broadly now due to the interwebz. But that's the world we, and public companies, live in today.
post #10670 of 11190
Quote:
Originally Posted by MSchapiro View Post

If there is no tie of accountability and responsibility what is the point? It's not preventative then, it's just punative for being at the wrong place at the wrong time. 

WFC paid their $180M fine. Many multiples of what the scheme potentially netted them. 

The alternative is a system where a CEO can basically act like a mob boss and use plausible deniability to direct all kinds of unethical acts knowing he's never at risk. This way the CEO has a vested interest in things being run cleanly because he's out on his ear if he can't. What happened here is a positive message.

While they paid a fine, actors in the company committed fraud, which is an offense that often results in jail. I'd rather see people responsible jailed than a slap on the wrist fine.
post #10671 of 11190
Quote:
Originally Posted by lawyerdad View Post

Fair. I suspect we may have different baseline assumptions about the depth of the CEO talent pool. Just as a CEO can't prevent every bad thing that might happen, he or she can't honestly take credit for many of the good things that happen. Right place, right time. Leave aside founder CEO's for a minute, who I think are sort of a different animal. I'm just not starting from the assumption that Stumpf's (or many other public company CEOs) necessarily dramatically better at being the CEO of Wells Fargo than whoever the next in line might be. I think the talent pool is deeper than that. Given that, I don't really see the great cost of what you see as a long term policy mistake.

I'm pretty sure Senators were always willing to manipulate fact, back to the glory days of Rome. Sure, good PR and bad PR both travel more quickly and broadly now due to the interwebz. But that's the world we, and public companies, live in today.

I actually do think that the pool of potential CEO talent is very deep and their impact on an organization can vary wildly. I've always thought justification for their salaries can come from the leverage naturally employed in their position. It only takes one good decision the other guy wouldn't have made to cover your salary multiple times over. Of course there is no real way to quantify this. I also this it matters considerably more for some companies than others. At my previous place of employment it made little difference, where in my current one the CEO had a huge direct impact.

 

Then there is the fact that boards and companies are often willing to pay for pedigree and credentials over taking a chance on someone new. The potential pool is always very big, but the pool of available and credentialed CEOs tend to be much smaller in my experience. 

 

I've also dealt with probably 100+ CEOs at this point in my career and found a huge spectrum of difference in quality. 

 

WFC did trade at a much higher price to book than its peers, in many parts due to Stumpf's leadership. 

 

But I ultimately think having any entity in the business eco system that is too powerful leads to negative effects. One can quantify that fines have gotten progressively bigger. In my opinion they have also required less and less evidence on many occasions that what would have in the past. I think the good that comes from this is a parabolic function and sharply drops off when you exceed a point. 

 

Quote:
Originally Posted by idfnl View Post


The alternative is a system where a CEO can basically act like a mob boss and use plausible deniability to direct all kinds of unethical acts knowing he's never at risk. This way the CEO has a vested interest in things being run cleanly because he's out on his ear if he can't. What happened here is a positive message.

While they paid a fine, actors in the company committed fraud, which is an offense that often results in jail. I'd rather see people responsible jailed than a slap on the wrist fine.
 
That's the extreme alternative, not the logical one.
 
The CEO should have a vested interest in things being run cleanly, but it shouldn't be a binary one that any infraction results in dismissal. 
post #10672 of 11190
Jail, folks, that's the only answer.

Nurse aide in ER steals a wallet, jail the hospital CEO. It's the only way.
post #10673 of 11190
Quote:
Originally Posted by MSchapiro View Post

That's the extreme alternative, not the logical one.

The CEO should have a vested interest in things being run cleanly, but it shouldn't be a binary one that any infraction results in dismissal.

It's also an extreme responsibility and and extreme pay scale.

When you have such a high level of responsibility, the associated bar should be even higher to protect the integrity of the company, nation state and the employees that rely on the income for survival. So that means dismissal in the face of scandal. I'm not exactly sure what you're advocating for at this point, because you're saying that a massive fraud committed under your watch isn't enough then what on earth is?

And lastly, unless ouster and public shaming are available tools to keep a CEO in line, then there no longer is a " vested interest in things being run cleanly". As I've said before, most people are generally pieces of shit unless being observed and from what I read you're taking away the few tools that are left.
post #10674 of 11190
Quote:
Originally Posted by MSchapiro View Post

I actually do think that the pool of potential CEO talent is very deep and their impact on an organization can vary wildly. I've always thought justification for their salaries can come from the leverage naturally employed in their position. It only takes one good decision the other guy wouldn't have made to cover your salary multiple times over. Of course there is no real way to quantify this. I also this it matters considerably more for some companies than others. At my previous place of employment it made little difference, where in my current one the CEO had a huge direct impact.

Then there is the fact that boards and companies are often willing to pay for pedigree and credentials over taking a chance on someone new. The potential pool is always very big, but the pool of available and credentialed CEOs tend to be much smaller in my experience. 

I've also dealt with probably 100+ CEOs at this point in my career and found a huge spectrum of difference in quality. 

WFC did trade at a much higher price to book than its peers, in many parts due to Stumpf's leadership. 

But I ultimately think having any entity in the business eco system that is too powerful leads to negative effects. One can quantify that fines have gotten progressively bigger. In my opinion they have also required less and less evidence on many occasions that what would have in the past. I think the good that comes from this is a parabolic function and sharply drops off when you exceed a point. 

Helsinki Syndrome if I've ever seen it.

I've met and worked with about 25 CEOs of publicly traded companies, and without fault I found them to be greasy maneuvering pricks, and probably sociopaths. For some reason it seems to take that sociopath gene to lead when juxtaposed with the environment that breeds these shitty leaders and encourages these dishonorable traits.

Same as politicians.

You only need to look at American culture exposing it's underbelly with whose on deck in his election. Same crappy "leaders". They're the same people that crave power, generally the same people that you'd never want in these roles. So you get scandal after scandal, and yet they don't deserve to be fired.
post #10675 of 11190
Wait, are we talking about Nokia now?


(Yeah, I know that Sweden and Finland are supposedly different countries, but only they care about the difference.)
post #10676 of 11190
Quote:
Originally Posted by lawyerdad View Post

Wait, are we talking about Nokia now?


(Yeah, I know that Sweden and Finland are supposedly different countries, but only they care about the difference.)

Fuck me...Stockholm Syndrome. Those white people all look alike.
post #10677 of 11190
Quote:
Originally Posted by idfnl View Post


It's also an extreme responsibility and and extreme pay scale.

When you have such a high level of responsibility, the associated bar should be even higher to protect the integrity of the company, nation state and the employees that rely on the income for survival. 

Yes, but that looses meaning when the bar is impossibly high. I laid out specifics previously for why I think, given the facts, that this is setting the bar impossibly highly. 

Quote:
Originally Posted by idfnl View Post


Helsinki Syndrome if I've ever seen it.

I've met and worked with about 25 CEOs of publicly traded companies, and without fault I found them to be greasy maneuvering pricks, and probably sociopaths. For some reason it seems to take that sociopath gene to lead when juxtaposed with the environment that breeds these shitty leaders and encourages these dishonorable traits.

Same as politicians.

You only need to look at American culture exposing it's underbelly with whose on deck in his election. Same crappy "leaders". They're the same people that crave power, generally the same people that you'd never want in these roles. So you get scandal after scandal, and yet they don't deserve to be fired.

I think you have a predetermined conclusion and are picking the facts to fit that conclusion. 

 

Of all the CEOs I've met few fall into broad and easily characterizeable buckets and instead represent a very wide range of people and attitudes. Now sure, when you get done to large public companies only you find a certain level of political skill is required to make it there, but to say the majority you've met are potentially sociopaths just doesn't seem accurate or reasonable. It's that kind of attitude why I feel fairly strongly about this. People will find reasons to justify wanting their pound of flesh and convincing themselves they are doing a good thing. After all they're just giving the sociopaths what they deserve. 

post #10678 of 11190
Quote:
Originally Posted by MSchapiro View Post

Yes, but that looses meaning when the bar is impossibly high. I laid out specifics previously for why I think, given the facts, that this is setting the bar impossibly highly. 
I think you have a predetermined conclusion and are picking the facts to fit that conclusion. 

Of all the CEOs I've met few fall into broad and easily characterizeable buckets and instead represent a very wide range of people and attitudes. Now sure, when you get done to large public companies only you find a certain level of political skill is required to make it there, but to say the majority you've met are potentially sociopaths just doesn't seem accurate or reasonable. It's that kind of attitude why I feel fairly strongly about this. People will find reasons to justify wanting their pound of flesh and convincing themselves they are doing a good thing. After all they're just giving the sociopaths what they deserve. 

Across these broad and easily characterizable buckets you mention is a string of common traits.

There is a reason this keeps happening. Research shows that CEOs are 4x more likely to be psychopaths. In the 2nd article it says CEO is #1 per capita.

http://www.forbes.com/sites/jeffbercovici/2011/06/14/why-some-psychopaths-make-great-ceos/#9ce835c4facf
http://www.salon.com/2015/06/23/10_careers_with_the_most_psychopaths_per_capita_partner/

FWIW, in the 2nd link, lawyer is #2.

The article even says that it’s very tempting to look at anyone more successful than you are and say “It must be because he’s a monster.” I'm not one of them, I know lots of successful people, but if you put me in a room with 2 strangers (1 is inherited wealth, the other a CEO), I'll pick the CEO in 10 seconds. There's just an obvious body of traits they share if you're willing to look.

There is a strong case to make that society rewards these types of personality traits. For some odd reason people are charmed by it (it's why we keep electing these same pieces of shit in politics), and so if you look at the history of corporate scandal it might not be so unreasonable to draw an inference between scandals and crazy people steering the ships.

Not everyone gets to the top of that corpo ladder, and so the next rung or two down is littered with these types as well... where you'll probably find the few people that were ultimately behind this fraud at Wells.

It's funny, if you ask 100 people "should a psychopath be running a large company?" I'll bet 95 would say "no, never", but then there they are...
post #10679 of 11190
Quote:
Originally Posted by MSchapiro View Post

I keep about 5-10% in IAU and sell it off occasionally to offset broader stock market declines. Long term I target to hold about 5% in gold. 

Bullion not contracts. Rebalance into/out of 2%. The 100 year avg annualized return on gold is a meager 0.7%. ie < a tenth the equity risk premium. It doesn't shoot up nearly as dramatically during market panics as many expect if the USD is strong. Still a useful insurance allocation at 2% -but if you want an insurance instrument for a prolonged recessionary bear buy a managed futures ("CTA") hedge fund or, now conveniently, ETF. These did +26% during 08-09. I'd hold this more towards 5% of your total ptflio rather than gold at 5.
post #10680 of 11190
My experience with them has been the exact opposite. Running a large company means that you have to do so with the business in mind and not really concern yourself with the little guy's qualms with every decision that you make....however on a personal level the ones I have met have been pretty normal and have even gone out of their way to be considerate and inclusive.
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