Writing shareholder communications is a thankless task. Most shareholders throw away the reports, and even the ones who keep them won't read the fine print. This apathy results because most companies do a terrible job communicating with their small shareholders. With the exception of Berkshire Hathaway (aka Warren Buffett), no company seems to invest much time in producing creative or thoughtful shareholder communications. I know this because I read all my annual reports. I don't claim to understand everything I read, but I love reading them. Here are some highlights so far:
1. GE's 2008 annual report was excellent. Mr. Immelt continues to do a great job re-building his own and his company's reputation. When Mr. Immelt states, "I assure you that we will work hard to restore your trust, and we will continue to work hard to build GE for the long term," I believe him. Here are some other notable sections from the letter:
On government's expanding role: The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.
On Wall Street: The financial industry will radically restructure. There will be less leverage, fewer competitors, and a fundamental repricing of risk. It will remain an important industry, just different.
On America's future: I run a global company, but I am a citizen of the U.S. I believe that a popular, thirty-year notion that the U.S. can evolve from being a technology and manufacturing leader to a service leader is just wrong. In the end, this philosophy transformed the financial services industry from one that supported commerce to a complex trading market that operated outside the economy. Real engineering was traded for financial engineering. In the end, our businesses, our government, and many local leaders lost sight of what makes a nation great: a passion for innovation.
You can read the full letter here.
2. Other companies also took their duty to communicate to shareholders seriously. Kudos to Dominion Resources, Inc. (D) for its transparent, detailed 2009 proxy statement. I've always believed companies should be as transparent as possible when it comes to compensation and other issues, and Dominion did a fantastic job this year. It even managed to do a decent job defending the indefensible--supplemental executive pension plans. You would think after being paid millions of dollars, executives could manage their retirements without further shareholder assistance, but most companies pay executives millions of dollars after their executives leave.
Dominion stated that much of its executive compensation is based on long-term goals, so it needed an extra carrot to attract top performers. In addition, it argued its supplemental pensions are tied to restrictive covenants such as non-competes, dissuading retired executives from working for competitors. (Some states, such as California, won't enforce non-competes, but Dominion isn't a California corporation.) Elsewhere in the report, Dominion supported its arguments with charts showing that most of its executives' compensation was tied to long-term goals rather than base salaries. I'm not saying I was convinced, but at least I can clearly understand Dominion's point of view.
So far, only Dominion and Walmart have caught my eye when it comes to outstanding shareholder reports. They deserve recognition for their outstanding work.
Dominion isn't perfect. Page five of its "2008 Summary Annual Report" has a picture of a television screen showing what appears to be a generic basketball game. No one but a huge basketball fan would notice anything unusual about the picture, and even then, you'd need a magnifying glass to notice anything non-generic. Now, I happen to be a huge basketball fan, and I recognized Grant Hill and Joe Dumars from their Detroit Pistons days. What's the problem? Grant Hill hasn't played for Detroit since 2000. Joe Dumars hasn't played for Detroit since 1999. That means Dominion used a picture that is at least nine years old. Do'h!
"And if an epitaph be my story, I'd have a short one ready for my own: I had a lover's quarrel with the world." -- Robert Frost
Wednesday, April 15, 2009
Government in Action
I don't know how I missed this tragically funny story about American immigration agents spreading the love, Homeland Security-style:
http://www.startribune.com/local/11592171.html
Erkki Maattanen, a filmmaker for Finnish Public Television who accompanied the musicians on the September trip, said his questioners seemed to think the entourage was smuggling drugs or intending to work without a permit. "I kept trying to tell them why we were here, but they'd just yell, 'Shut up!"' he said.
Ladies and gentlemen, your taxpayer dollars are hard at work.
Hat tip to http://thisiswhyiloveminneapolis.com/
http://www.startribune.com/local/11592171.html
Erkki Maattanen, a filmmaker for Finnish Public Television who accompanied the musicians on the September trip, said his questioners seemed to think the entourage was smuggling drugs or intending to work without a permit. "I kept trying to tell them why we were here, but they'd just yell, 'Shut up!"' he said.
Ladies and gentlemen, your taxpayer dollars are hard at work.
Hat tip to http://thisiswhyiloveminneapolis.com/
Guantanamo Redux?
Wait, didn't we vote for change?
http://politics.theatlantic.com/2009/04/obama_appeals_bagram_detainee_ruling.php
I'm not going to say, "Meet the new boss--same as the old boss"--at least not yet. There appears to be a fine legal distinction involved in the appeal, but my spidey-sense is tingling.
Check out the April 15, 2009 Tom Toles cartoon for more.
http://politics.theatlantic.com/2009/04/obama_appeals_bagram_detainee_ruling.php
I'm not going to say, "Meet the new boss--same as the old boss"--at least not yet. There appears to be a fine legal distinction involved in the appeal, but my spidey-sense is tingling.
Check out the April 15, 2009 Tom Toles cartoon for more.
Tuesday, April 14, 2009
Boston Globe's Big Picture
This link contains many interesting pictures and is regularly updated:
http://www.boston.com/bigpicture/
If a picture says a thousand words, there's lots of reading there, bub.
http://www.boston.com/bigpicture/
If a picture says a thousand words, there's lots of reading there, bub.
Monday, April 13, 2009
Pete Murphy is Wrong about Immigration
Pete Murphy and I had are having another short discussion on immigration, this time on his blog. We've had this debate before, and I went back for Round 2. See below (comments section):
http://petemurphy.wordpress.com/the-case-against-immigration
Here are my responses to Mr. Murphy's anti-immigration views:
1. I agree that California is a fiscal disaster. That's because California spends most of its tax revenue on education. In addition, the salaries, medical costs, and pension obligations of public sector employees--officers, firefighters, teachers, etc.--create a significant impact on CA's budget. Illegal immigration is a convenient scapegoat for CA's refusal to cut spending across the board. See this PDF file for more information:
http://www.ebudget.ca.gov/pdf/BudgetSummary/SummaryCharts.pdf
It shows that education is the #1 spending item in CA, by far; then comes health and human services; then jails (CA jails too many nonviolent criminals). Some illegal immigrants may receive health and human services, but until we receive a breakdown of how much money or services is given to illegal immigrants, blaming them for CA's budget crisis is, at best, resorting to speculation, and at worst, scapegoating. Keep in mind also that immigrants pay sales taxes.
2. As for your dismissal of the idea that you might be deporting our next generation of ideas, you don't have any statistics supporting your view. My previous posting had a link showing that at least 1/2 of the companies in Santa Clara County were founded by immigrants or children of immigrants. If we accept your philosophy of slow growth, San Jose, S.F., L.A., and N.Y. all disappear as we know it.
Gone are also Google (Russian immigrant), eBay (Iranian French immigrant), Sun (Indian immigrant), Intel (Hungarian), and so on. Basically, if we followed your advice 20 years ago, we'd be decades behind in technological progress.
3. You want America to look like Indiana--a nice place, certainly, with good schools, low population growth, and ample land. But let's not confuse economic growth with other amorphous variables, such as happiness or quality of life. It is clear that more immigration leads to more jobs and more overall income. If that wasn't the case, immigrants and younger Americans would not be flocking to the larger cities. Your distinction that per capita income declines as more people gather in a particular place isn't significant in a globalized world where companies can ship jobs anywhere. There must be a reason companies and their employees stay in a particular city, even as per capita income declines. If declining per capita income was a problem, intelligent Americans would be flocking to smaller or low growth cities. They are not.
I am actually in agreement with you re: your main thesis. If you want a slower pace of life and a more close-knit community, lower growth policies and protectionism are conducive to those goals. Thank goodness we live in a country where you can freely move to Indiana, Montana, or another state where the majority population agrees with your slow growth philosophy. That's the beauty of America--there's somewhere pleasant for everyone.
However, advocating protectionism and closed borders would involve a serious reversal of American dominance and prestige. Other countries would start creating jobs and companies at our expense, immigrants would start going elsewhere (like to Canada and Australia), and America would fall decades behind in job growth. A reversal of overall growth, if accepted, may lead to future generations of Americans moving to Canada, Australia, India, China, and Singapore to find jobs or deciding not to work at all (e.g., Japan's "hikikomori"). We take for granted that much of the educated world speaks English, knows about the Simpsons, and drinks Coke. The minute we stop creating jobs and attracting foreign talent, we make it harder for future Americans to succeed in the global marketplace.
In short, be careful what you wish for. We owe much of America's progress--and almost all of its technological progress--to immigrants. Societies that fall behind the global race rarely catch up.
http://petemurphy.wordpress.com/the-case-against-immigration
Here are my responses to Mr. Murphy's anti-immigration views:
1. I agree that California is a fiscal disaster. That's because California spends most of its tax revenue on education. In addition, the salaries, medical costs, and pension obligations of public sector employees--officers, firefighters, teachers, etc.--create a significant impact on CA's budget. Illegal immigration is a convenient scapegoat for CA's refusal to cut spending across the board. See this PDF file for more information:
http://www.ebudget.ca.gov/pdf/BudgetSummary/SummaryCharts.pdf
It shows that education is the #1 spending item in CA, by far; then comes health and human services; then jails (CA jails too many nonviolent criminals). Some illegal immigrants may receive health and human services, but until we receive a breakdown of how much money or services is given to illegal immigrants, blaming them for CA's budget crisis is, at best, resorting to speculation, and at worst, scapegoating. Keep in mind also that immigrants pay sales taxes.
2. As for your dismissal of the idea that you might be deporting our next generation of ideas, you don't have any statistics supporting your view. My previous posting had a link showing that at least 1/2 of the companies in Santa Clara County were founded by immigrants or children of immigrants. If we accept your philosophy of slow growth, San Jose, S.F., L.A., and N.Y. all disappear as we know it.
Gone are also Google (Russian immigrant), eBay (Iranian French immigrant), Sun (Indian immigrant), Intel (Hungarian), and so on. Basically, if we followed your advice 20 years ago, we'd be decades behind in technological progress.
3. You want America to look like Indiana--a nice place, certainly, with good schools, low population growth, and ample land. But let's not confuse economic growth with other amorphous variables, such as happiness or quality of life. It is clear that more immigration leads to more jobs and more overall income. If that wasn't the case, immigrants and younger Americans would not be flocking to the larger cities. Your distinction that per capita income declines as more people gather in a particular place isn't significant in a globalized world where companies can ship jobs anywhere. There must be a reason companies and their employees stay in a particular city, even as per capita income declines. If declining per capita income was a problem, intelligent Americans would be flocking to smaller or low growth cities. They are not.
I am actually in agreement with you re: your main thesis. If you want a slower pace of life and a more close-knit community, lower growth policies and protectionism are conducive to those goals. Thank goodness we live in a country where you can freely move to Indiana, Montana, or another state where the majority population agrees with your slow growth philosophy. That's the beauty of America--there's somewhere pleasant for everyone.
However, advocating protectionism and closed borders would involve a serious reversal of American dominance and prestige. Other countries would start creating jobs and companies at our expense, immigrants would start going elsewhere (like to Canada and Australia), and America would fall decades behind in job growth. A reversal of overall growth, if accepted, may lead to future generations of Americans moving to Canada, Australia, India, China, and Singapore to find jobs or deciding not to work at all (e.g., Japan's "hikikomori"). We take for granted that much of the educated world speaks English, knows about the Simpsons, and drinks Coke. The minute we stop creating jobs and attracting foreign talent, we make it harder for future Americans to succeed in the global marketplace.
In short, be careful what you wish for. We owe much of America's progress--and almost all of its technological progress--to immigrants. Societies that fall behind the global race rarely catch up.
Pensions
If you're into pension reform, this book might be interesting:
http://www.amazon.com/US-Pension-Reform-Lessons-Countries/dp/0881324256
I haven't read it, so if you do, let me know if it's worth a look-see.
http://www.amazon.com/US-Pension-Reform-Lessons-Countries/dp/0881324256
I haven't read it, so if you do, let me know if it's worth a look-see.
Sunday, April 12, 2009
Intel's Founder on America's Future
Fantastic article from the NYT:
http://www.nytimes.com/2009/04/12/business/12immig.html
“We are watching the decline and fall of the United States as an economic power — not hypothetically, but as we speak,” said Craig R. Barrett, the chairman of Intel.
I've sued Intel before, so I don't agree with everything it says or does, but Mr. Barrett knows of what he speaks. The fact that politicians are not heeding intelligent entrepreneurs like Mr. Barrett means our political system is broken. Politicians seem to be incapable of educating their constituents about the benefits of immigration. Part of the problem is that media outlets, which used to have substantive political discussions, such as FDR's fireside chats, have moved away from being an educational tool. In addition, the media's shock-value brand of journalism has diluted America's capacity for intelligent analysis.
When the Internet came on the scene, it seems that traditional media outlets ditched intelligent commentary and analysis in favor of "Do whatever it takes to look at me" journalism. Prior to the Internet, for example, reality television--where a loudmouth or superficial person was vaulted to celebrity status--was a small portion of mainstream media. (MTV's "The Real World" was really the only major reality show for years.) In contrast, today's media items are designed to appeal to the lowest common denominator (e.g., Octo-mom) to attract readers. In an age of video games, the Internet, text messaging, and numerous other entertainment options, mainstream media resorted to bottom-feeding to get eyeballs. As a result of so much information--most of it devoid of any real analysis--the public gets little news that has any real substance. If you assume that mainstream media is an important pillar in keeping a country on the right path, the media's declining standards should frighten you.
Speaking of pillars, the New York Times has been a beacon of light throughout America's history. It was responsible for the seminal case of NYT vs. Sullivan, which affirmed a newspaper's right to publish controversial new reports without fear of litigation. Here is one of my favorite parts of the opinion:
Those who won our independence believed . . . that public discussion is a political duty; and that this should be a fundamental principle of the American government. They recognized the risks to which all human institutions are subject. But they knew that order cannot be secured merely through fear of punishment for its infraction; that it is hazardous to discourage thought, hope and imagination; that fear breeds repression; that repression breeds hate; that hate menaces stable government; that the path of safety lies in the opportunity to discuss freely supposed grievances and proposed remedies; and that the fitting remedy for evil counsels is good ones. Believing in the power of reason as applied through public discussion, they eschewed silence coerced by law - the argument of force in its worst form. Recognizing the occasional tyrannies of governing majorities, they amended the Constitution so that free speech and assembly should be guaranteed."
Now ask yourself: are Octo-mom, Madonna's adoption efforts, and Lindsey Lohan's romantic exploits what America's founders contemplated when they talked about our duty to have "robust" political discussions? To wit: the top stories on Yahoo's main portal right now are about a ship captain's rescue; Obama's dog; Lohan's hair; and cable TV bills. Go back and re-read Mr. Barrett's comment above.
Oh, the decline of an empire.
http://www.nytimes.com/2009/04/12/business/12immig.html
“We are watching the decline and fall of the United States as an economic power — not hypothetically, but as we speak,” said Craig R. Barrett, the chairman of Intel.
I've sued Intel before, so I don't agree with everything it says or does, but Mr. Barrett knows of what he speaks. The fact that politicians are not heeding intelligent entrepreneurs like Mr. Barrett means our political system is broken. Politicians seem to be incapable of educating their constituents about the benefits of immigration. Part of the problem is that media outlets, which used to have substantive political discussions, such as FDR's fireside chats, have moved away from being an educational tool. In addition, the media's shock-value brand of journalism has diluted America's capacity for intelligent analysis.
When the Internet came on the scene, it seems that traditional media outlets ditched intelligent commentary and analysis in favor of "Do whatever it takes to look at me" journalism. Prior to the Internet, for example, reality television--where a loudmouth or superficial person was vaulted to celebrity status--was a small portion of mainstream media. (MTV's "The Real World" was really the only major reality show for years.) In contrast, today's media items are designed to appeal to the lowest common denominator (e.g., Octo-mom) to attract readers. In an age of video games, the Internet, text messaging, and numerous other entertainment options, mainstream media resorted to bottom-feeding to get eyeballs. As a result of so much information--most of it devoid of any real analysis--the public gets little news that has any real substance. If you assume that mainstream media is an important pillar in keeping a country on the right path, the media's declining standards should frighten you.
Speaking of pillars, the New York Times has been a beacon of light throughout America's history. It was responsible for the seminal case of NYT vs. Sullivan, which affirmed a newspaper's right to publish controversial new reports without fear of litigation. Here is one of my favorite parts of the opinion:
Those who won our independence believed . . . that public discussion is a political duty; and that this should be a fundamental principle of the American government. They recognized the risks to which all human institutions are subject. But they knew that order cannot be secured merely through fear of punishment for its infraction; that it is hazardous to discourage thought, hope and imagination; that fear breeds repression; that repression breeds hate; that hate menaces stable government; that the path of safety lies in the opportunity to discuss freely supposed grievances and proposed remedies; and that the fitting remedy for evil counsels is good ones. Believing in the power of reason as applied through public discussion, they eschewed silence coerced by law - the argument of force in its worst form. Recognizing the occasional tyrannies of governing majorities, they amended the Constitution so that free speech and assembly should be guaranteed."
Now ask yourself: are Octo-mom, Madonna's adoption efforts, and Lindsey Lohan's romantic exploits what America's founders contemplated when they talked about our duty to have "robust" political discussions? To wit: the top stories on Yahoo's main portal right now are about a ship captain's rescue; Obama's dog; Lohan's hair; and cable TV bills. Go back and re-read Mr. Barrett's comment above.
Oh, the decline of an empire.
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