In the 11th part of this series, we will delve into the quality of management by reviewing the positive and negative traits of management.
As a reminder, this checklist of questions is adapted from Michael Sheen’s book “The Investment Checklist”.
For the previous parts of this series, you can refer to the links below.
Part 1 – please click HERE.
Part 2 – please click HERE.
Part 3 – please click HERE.
Part 4 – please click HERE.
Part 5 – please click HERE.
Part 6 – please click HERE.
Part 7 – please click HERE.
Part 8 – please click HERE.
Part 9 – please click HERE.
Part 10 – please click HERE.
48. Does the CEO love the money or the business?
The best kind of CEO for a business to one who is passionate about the business.
Money should be a secondary concern for him/her.
A passionate CEO will reject offers to buy out the company as he or she enjoys running the show and being in control.
Another indicator of passion is the constant need for improvement to avoid staying stagnant or ending up outdated.
CEOs who work purely for the money can easily be poached by competitors when offered a better remuneration package, as they will have no desire to stay and build the business.
49. Can you identify a moment of integrity for the manager?
CEOs with integrity do not say one thing yet end up doing something else.
As the saying goes – honesty is the best policy.
Honest CEOs are consistent in what they communicate to investors and follow through with their promises.
There are two ways to judge if a manager has integrity.
One is to observe and record what he or she promises to determine if results are being delivered or if the CEO is just paying lip service.
The second way is to see how the manager acts under different circumstances, as you never truly understand someone’s character until it has been tested by stress, adversity or a crisis.
This is what is known as a “moment of integrity” – how managers perform under extreme conditions would say volumes about their character.
50. Are managers clear and consistent in their communications and actions with stakeholders?
The more transparent and clear management is, the more accountable they are for their actions.
By being transparent, management is sending a message that it is not attempting to hide anything or to manipulate any information to its advantage.
If management embraces complexity as a mode of communication, there is a chance that they may be concealing risk-taking or bad judgement.
Be careful of such managers as they may not be truthful in discussing the problems relating to the business, and may mislead investors into thinking that things are better than they are.
51. Does management think independently and remain unswayed by what others in their industry are doing?
It is a very rare manager who will not be affected by the success of his peers or competitors and attempt to copy that success.
A manager who thinks independently will resist mindless copying in an attempt to replicate success.
It’s important to understand his or her strengths and leverage them to achieve success.
Shareholders commonly pressure management to maximise short-term profits, but the best managers are those who are unaffected by this and continue to build the company slowly over years, thereby putting long-term results over short-term success.
52. Is the CEO self-promoting?
Investors need to be very careful about investing in businesses run by CEOs who frequently self-promote or market themselves aggressively.
Such CEOs make themselves the brand, rather than the business.
They can be identified easily because they constantly brag about their accomplishments and are often articulate, brash and (over) enthusiastic.
Some of the best-performing CEOs are soft-spoken, team-oriented and dislike the limelight.
They quietly work their magic and let the results speak for themselves.
CEOs who are constantly in the news talking up their share price should be shunned, as it implies that he or she is spending more time promoting the company than actually running it!
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Disclaimer: Royston Yang does not own any of the companies mentioned.