Brian Gongol: It's 9:24 here on Newsradio 1040 WHO. I'm Brian Gongol here along with Brian Dean as we talk about making money and having fun. 284-1040 or 1-800-469-4295 are the telephone numbers. You can text us on the American Toppers & Accessories text line that number is 989-1040, again 989-1040. If you'd like to get hold of us via the text messaging line, please do not do that while driving. I do no want to contribute to any additional problems. Like we said, technology does let us get new things done. You can text us now, it's great but, on the other hand, once you're doing while driving, that's making you more dangerous!
Brian Dean: Use the right technology in the right communication tool.
Brian Gongol: Right, the right tool for the right purposes. Absolutely right.
"Turfbuilder" is texting us saying that we shouldn't discourage him from having his Triple Baconator, because he loves it.
Brian Dean: I do too, but maybe once a year, maybe. Yeah, that is a lot of meat. You have the triple patty and the bacon, which there's three or five slices of, on that one, the cheese...
Brian Gongol: I never had one. I'm terrified...
Brian Dean: You never had one. You can't even look at it.
Brian Gongol: I really shouldn't. I'm pretty sure my doctor wouldn't approve if I even looked askance at one of those things. I've got to know what my limits are. I've got to know what my boundaries are.
Brian Dean: At that place that we talk about, they have these giant sandwiches.
Brian Gongol: Oh, yes.
Brian Dean: Some that are so big.
Brian Gongol: I've seen people try to eat them.
Brian Dean: I've seen it too.
Brian Gongol: Yeah.
Brian Dean: I've watched it.
Brian Gongol: Yeah.
Brian Dean: That's a lot of meat. That's a lot of meat.
Brian Gongol: I personally prefer to know the bounds of my competence, and one of those boundaries is that I shouldn't try to eat foods like that.
Brian Dean: No, no.
Brian Gongol: I just shouldn't, I'm going to feel sick if I do and I might actually get sick if I eat that kind of stuff, so I'm just going to have to stay away from it. Knowing the boundaries of your competence is one of those skills that I feel like as adults we are supposed to develop.
Brian Dean: It doesn't always relate to food. I mean, we are talking about food because it's just fun, but we try to relate to the other things that are going on in the world around us. Apparently, not everyone seems to know the bounds of their competence as well.
Brian Gongol: Oh man, this is really bad. Yahoo says, "Now, we're going to put in a new CEO and a new Chairman of the Board on an interim basis here, effective immediately, because CEO Scott Thompson has left the company after more than a week of arguing over stuff that he put on his resume, apparently claiming degrees he had not actually earned." One would think, here's one of the problems that I have with how companies are managed today.
Now understand, I'm a very enthusiastic capitalist. I very much believe in the capitalistic system. I believe in free markets I think we all do better, we live better lives because of free markets. Everything from the foods we were talking about to the cell phones we have been discussing, all of those things are the result of people having a profit motive somewhere, in order to do something better and to produce something that is going to make life better for the people who are the consumers. Not to mention the fact that they make money in the process making themselves better off as well.
But here's the thing: There's a lot of activity that seems to take place in businesses where there is a big gap between the management and the owners. And it's a conventional division of labor in America, in that management overall to run a company is hired by essentially absentee owners to run the stuff for them. I mean, obviously, there are plenty of companies where the owner manages things, as well. Obviously, there are hundreds and thousands of those firms all over America. I'm part of one of them. Most people who are familiar with smaller businesses encounter that, as well. But when you get to a company that is publicly traded, oftentimes there is a separation between the owners and the managers. Now, sometimes, there is still a close relationship there. There are plenty of companies where a founder decides to take a company public but still keep a big ownership stake in it. But for most cases, for most of the really large companies in America, lots of little investors have shares in the company, whether they own them directly or through mutual funds. They own the pieces of the company and they hire the managers to run the companies honestly. The check and balance that's built into this system is that the Board of Directors is supposed to be there to oversee the managers, to manage the management.
I get the feeling, and I think this is Yahoo's experience, is just one of those that says maybe boards just aren't really doing enough. They're the ones who are there to represent the absentee owners, the shareholders, the people who can't be there to supervise management. They're there to represent them. Hypothetically, many of them themselves are shareholders in the company and then have a vested interest in supervising how things are done. But, if you miss something as big as, "This guy lied about going to college"...
Brian Dean: [laughs]
Brian Gongol: ...that seems like the kind of thing where, if I were hiring somebody for my own business, I am pretty sure I'm going to make sure there's a reference or two on their background educationally that, if they claim that they went to four years of college, that they really did show up four years and graduated with a degree.
Brian Dean: It would seem like you could get that information.
Brian Gongol: You really could. You can usually call the registrar's office and confirm that somebody actually possesses the degree they claim to have. You can ask for transcripts, things like that. This is not hard to double-check. If the board of Yahoo didn't bother to even double-check the references on the dude's resume, they clearly aren't doing their jobs. It's amazing how far off the mark a lot of boards have gotten. If they're not even doing the basic work of checking the resume of the person they're hiring for the company, why are they getting paid to sit in on these board meetings? Why are they allowed to continue sitting on the Board of Directors? This is the absolute minimum level of work they should be asked to do. On behalf of those absentee owners who don't get a say in hiring the new CEO, maybe they ought to check it out for themselves. It doesn't sound like this is hard to do.
I found an article online this week that was discussing this very problem. I thought it was really interesting, and it appealed to me because it suggested that maybe boards should follow a checklist when they're going through some of their basic routine duties. I think they're absolutely right about this.
I love checklists, by the way, so I'm willing to give them a pass, even if some of the suggestions aren't even the greatest. But some of these make plenty of sense. Asking, "Did you actually do the things that you show on your resume? Can I confirm your work history, your educational background, and anything else that you've done? Is all that true?" That seems like that's a basic thing. This article even suggests that at one point, some of the directors at Hewlett-Packard hired, not the most recent CEO but the CEO from before -- the guy who lasted in the job about six months, I believe -- they hired him without even having interviewed him or met him. How can you do that? You wouldn't hire a kid to go work as a grocery store bagger. You wouldn't hire them to sack groceries without...
Brian Dean: Reputation, I suppose. Is that it?
Brian Gongol: [laughs] You wouldn't hire them to do that without a face-to-face meeting. How would you in the world think it's acceptable to hire somebody to be CEO of a company without having a face-to-face meeting with them? That's like the most stunning degree of incompetence that I can actually believe is out there. The thing about this is, I don't think this is something that you solve by having government step in with additional regulations. I don't think the government has any clue in how to manage this kind of stuff. The government can't keep some Secret Service agents from going after hookers.
Brian Dean: Gosh, I wish they could, though. You're absolutely right. When we tie these other things...
Brian Gongol: They can't do this.
Brian Dean: Somebody has to be able to do it. At the same time, how can you trust the companies to self-regulate? They can't, either!
Brian Gongol: That's the problem here, that government isn't capable of solving this problem. The capitalists have to be the ones to solve this problem. When I say the capitalists, I mean everybody who owns a share of stock, who's involved in a mutual fund, who has a retirement account somewhere, everyone of us has a part to play in this and part of it is looking after whether among other things your Board of Directors is doing the job at all. If you find that they are bringing you stupid proposals, if you find that they haven't been managing management very well, fire them! You have a vote. That is the thing. You get a vote.
Brian Dean: Wasn't there a group that was in charge of some sort of training thing here in the state of Iowa, when they just rubberstamped things
Brian Gongol: Why, yes. That is the thing. It is really nice to get your name on the list of Board of Directors of about anything. Makes it sound prestigious, makes it sound like you are an important person.
The thing is, if you are there for the prestige and a paycheck and you are not actually looking after the interests of the people you are there to represent, then you should be tossed out. Just as we should be eager to throw out people who go to Washington or even the statehouse here in Des Moines as our elected officials and they do a terrible job and we should fire them. You should do the very same thing when it comes to the people who are representing you as the Board of Directors at a company in which you have even one-token share. If they are not doing the job, kick them out. If we're not kicking these people out, that just says that we are terrible owners, that we are lazy, irresponsible, feckless owners who are not doing our own job of holding people accountable.
You are turning over your money to them, which, by the way, when you turn over to somebody you are turning over a portion of your life. You don't earn money without spending time doing something, whether it is learning a skill or actually doing the work somehow. That represents your life and, if you're not willing to guard that, if you are not willing to respond to that and protect that at the very least by voting out people who clearly are not doing their jobs, then you are just throwing your life away, in a sense.
Anymore, now that you retire at say at 60 or 65 or 67 or whatever the number is for you, and you live to a normal lifespan after that, you may be spending 20, 30, 40 years living off of those earnings that you put aside during your working life. If you aren't willing to step up and guard that stuff by throwing the bums out when you are given the choice to do so as a shareholder, then you are not doing enough of your job and these boards have to do these jobs and recently we need to start kicking them out. Maybe it is good to start defaulting to "No" when it comes time to vote on these people.
Brian Dean: ...or whatever. See, most people those get those things in the mail and toss them.
Brian Gongol: Maybe it is time to start defaulting to "No." I don't know, because it has just come to a point at which you must, you have to say, "This is my money." This is just as bad. I mean, if you bring in a CEO for Yahoo who is so stupid that he lies about what his educational background on his resume, and the board is so stupid that they don't police it and don't even look, then...
Brian Dean: I don't think that the guy who ran Yahoo was that stupid for doing it.
Brian Gongol: He might have been very [indecipherable 11:08] and tried to cheat the system but, if he was trying to cheat the system, if he was lying about his background or his history, if he wasn't being forthright and honest about this, then he is a crook.
Brian Dean: You're right, OK, but what if he does all these great things for the company
Brian Gongol: Doesn't matter. It is just like...
Brian Dean: I would like to think that you are right but I disagree because if somebody, "Oh, he is a crook, but he is our crook and he does such great things."
Brian Gongol: Right.
Brian Dean: It is kind of somebody looking at a politician, "It's our guy."
Brian Gongol: Exactly.
Brian Dean: "He is our guy, he is a D, he is an R. It makes no difference. He is one of our guys." It's like, "Oh, we don't like war, but then our guy is now in charge of the war, so we like it." I mean, it's nuts.
Brian Gongol: It is, it is, and the problem is we let this happen on the political side of things, everybody just kind of tolerates..."Well, there's a democratic machine that runs Chicago and it is totally corrupt and it's all based of everybody slapping everybody else's backs and everybody has got favors going on and there is no such thing as a Republican party in Chicago." There is no legitimate opposition there and as a result, "But, the city works, so we're OK with it. The Daley machine works, so we're OK with it." At some point or another, you have to say, "No, it's not OK. I don't care if it's working. If we are getting to the right conclusion via the wrong method, it's time to change the method."
It wouldn't be OK if you happen to be very good at math, but every time you wrote out a proof you were totally wrong until you got to the very end. I had a teacher at one point--I am not going to name names here--but his method of instruction involved faking everything that he wrote on the chalkboard, doing it to amuse himself, but still arriving at the right answer at the end. OK, it was really funny the first time but by the time we got halfway through the semester I still did not understand--fill in the subject here--I am still thinking, "I want to know the process. I have got to get the process right if I am ever going to get anywhere with this." You have to get the process right to get the right result. Even if the result at the end looks like it is the right answer, it doesn't mean that it is the right answer if you got there the wrong way.
Brian Dean: I think that is why a lot of shareholders, though, are OK with things. As long as the profits are coming in, as long as the stock price is going up, it doesn't matter as much.
Brian Gongol: Until you're JP Morgan and you lose $2 billion.
Brian Dean: Exactly, but JP Morgan was doing fine.
Brian Gongol: Yeah, exactly.
Brian Dean: I am not worried at all. It's all OK.
Brian Gongol: Everything looks OK...
Brian Dean: My wife has a lot of her money there.
Brian Gongol: With JP Morgan?
Brian Dean: Her 401k stuff, yeah.
Brian Gongol: Now, are they, I mean, so they are doing the management of it for her?
Brian Dean: Well, it's through where she is working.
Brian Gongol: That is the problem here. I mean, they literally lost $2 billion and the thing that they are coming out and they are saying here is, "Well, we were trying to be good about this but we were sloppy." OK while it is going to take time to determine whether that is exactly right...I mean, there is going to have to be essentially some forensic accounting here to determine if that was true.
Brian Dean: Do you think that might be just one of those things to get to through new cycle?
Brian Gongol: Yeah, that is the thing.
Brian Dean: Then, maybe something else comes up and this is not going to be new. Then, think about the things that we were talking about may be a month ago that we are not talking about now.
Brian Gongol: Right. Exactly.
Brian Dean: Things that we could talk about but we're not.
Brian Gongol: Because we've done a new thing.
Brian Dean: "We were sloppy." OK, that will take maybe five days and then there will be something else. Exactly.
Brian Gongol: Just pay no attention to the man in the corner, the man behind the curtain, he has nothing to do with what is going on here. It is going to take some time to figure out if this is right and if they just kind of, "Well, we were sloppy. Oops. Everybody makes mistakes." Maybe that is true, because everybody does make mistakes. Maybe it is true. Maybe it is completely wrong. We won't know until, probably, it is too late to do anything about it
Brian Dean: Yeah, plus then the $2 billion is still gone.
Brian Gongol: Yeah, the $2 billion is gone, one way or the other. The bottom line here is companies have to have some kind of responsibility internally. When I say companies, I mean the people inside companies. I am not the type of person who subscribes to this notion that these entities exist entirely on their own and that there's a separate category of ethics called business ethics. I think there's just ethics. If you are not an honest forthright person in business, you are not an honest forthright person. If you are not a decent human being in business, you are not a decent human being.
It's not like all this stuff changes when you go in and punch a clock and show up to workplace. You have to be honest and forthright and ethical throughout life. Again, arrive at these decisions and these conclusions by the right path. If you didn't get there via the right path, then the answer that you get is wrong, even if it looks right.
284-1040 or 800-469-4295 or you can text on the American Tappers and Accessories text line. That number is 989-1040. Right here on Newsradio 1040 WHO.
They came to a conclusion up in Minneapolis. We are going to have to chat about here for a second.
Brian Dean: I am a Vikings fan.
Brian Gongol: I know. That is why we are going to...
Brian Dean: I really don't care any more.
Brian Gongol: It's going to be costly for anybody living there, that's for sure. We'll chat about that one in just a moment. 9:40 here on Newsradio 1040 WHO.