Sunday, June 13, 2010

Longleaf Partners Funds May 5th Shareholder Presentation

Finally, we’re convinced the 2008 financial crisis would have been avoided had America’s largest financial corporations been stewarded by Directors who were at risk with their shareholders. So governed, these companies almost certainly would have not irresponsibly over-leveraged and hypothecated their balance sheets, granted excessive one-way cash compensations incentives to managements, and approved loans that fundamentals and common sense told them would not be repaid.

Instead of being required to view their Board responsibilities through owners’ lenses, Directors were paid egregiously large cash compensation and incented essentially to show up, approve management’s agenda, collect their fees, and leave. And, as we’re all painfully aware, shareholders and U.S. taxpayers picked up the tab for this horrific oversight. Not only did they not share the downside risk with shareholders that they supposedly represented, they took multi million dollars of cash from owners.