You know that feeling you get when a crappy salesman is trying too hard to sell you something? That stereotypical used car salesman? Ugh, I can’t stand it. That’s how I feel when a CEO goes on and on about creating shareholder value. I was recently reading through some Bob Evans Farms (BOBE) conference call transcripts and I wanted to throw up.
When talking about strategic alternatives the company is considering, the CEO Saed Mohseni said “All options of Bob Evans are under consideration by our board of directors. And I believe that ultimately the board will make a decision that is in the best interest of our shareholders and create value for our shareholders.” Next, an analyst asked about a timeline for the strategic alternatives and his answer nauseated me: “I think the best timeline is when we feel that truly enhances shareholder’s value.” My bullshit-meter could not have gone off any louder—what the fuck does that even mean? He obviously wanted to avoid the question, but it’s like he thinks that as long as he throws “shareholder value” into the answer that shareholders will be happy. The ironic thing is that he owns very few shares (all of which were gifted to him) so I highly doubt he cares about shareholder value as much as he talks about it. And if shareholder value is such a huge focus of his, he should probably be gobbling up shares in the open market in preparation for all the value he’s about to create.
I don’t mean to harp on Mohseni too much because a ton of public company CEOs are guilty of this. So many conference calls are the CEO talking about how perfect everything is going, the sales ramp is just around the corner, we’re firing on all cylinders, creating shareholder value, blah blah blah. This has always annoyed me, but it’s front of mind today because after feeling nauseous from the Bob Evans conference calls, I read Thomas Peterffy’s presentation he gave yesterday and the juxtaposition of the two was so glaring. Interactive Brokers’ conference calls are always my favorite to listen to.
First, Peterffy is extremely intelligent and I always feel like I learn something listening to him. Second, his straightforward honesty is so refreshing. He has zero PR filter and he has no problem owning up to mistakes or talking about areas they’re struggling in. He also has a very clear and consistent goal that hasn’t changed in a long time. Analysts are always asking him to expand the services he offers or to return capital to shareholders and he keeps giving the same answers (no idea why they keep asking):
“We will never do capital introductions. We will never bring CEOs together with potential investors because we will never do the things that we cannot automate, we are a bunch of computer programmers, and that’s what we do.”
“I’m trying to make sure that we are viewed as the safest broker in the world. And for that reason, I will retain all future earnings to the extent possible.”
And his goal? “I always wanted to become the biggest broker and before I die, it will be.”
The dude is on a mission. And that mission is not “create shareholder value.” If he succeeds (as he’s done all his life) he will create a ton of shareholder value, but him talking about creating shareholder value would be empty, it’s meaningless. When he talks, it’s about how the business is doing (good and bad) and how he’s going to continue that into the future. No bullshit fluff. He’s not doing it for money (he’s already a multi-billionaire) and he’s not doing it to create shareholder value, he wants to build the biggest, cheapest, most efficient broker in the world and he’s been consistent in that message for many years. I’d rather bet on someone who has that very clear goal, as opposed to someone whose only goal seems to be appeasing shareholders.
If your response to the above is “Peterffy owns 80-some percent of IBKR, of course he can say whatever he wants,” I don’t disagree, so I’ll mention a few other CEOs I admire. It might sound counterintuitive, but I’m always impressed when CEOs talk about mistakes they’ve made or areas their business is struggling in. I immediately view them as more honest leaders who I’m more likely to trust with my capital.
Doug Vickerson, CEO of Renoworks Software (RW.V), is one of those types. When I sat down to meet him for the first time, he immediately started telling me about something he was struggling with. Didn’t even give me his sales pitch, he just wanted to talk about what was truly on his mind. When talking about how long it’s taken to get his technology ready for commercial use, he said “If I was offered $1 million per year I wouldn’t leave. I’ve been here ten years and I’m committed to seeing this through.” He makes $150k per year by the way. I really enjoyed how casual Doug was talking about his company. I felt more like a friend asking him questions about his business as opposed to the CEO/investor dynamic. Very laid back and straightforward, no BS. Oh, and no mention of how much shareholder value he’s creating.
Likewise, I had my first phone call with John Saunders, CEO of Where Food Comes From (WFCF), last month and came away very impressed. He had no problem talking about struggles they’ve had, all his “guidance” was extremely toned down (“this stuff takes years, I don’t know when it will happen”), and he never mentioned creating shareholder value. What he did talk about is how he’s spent 20 years building WFCF and how he’s positioned it to dominate their market for the foreseeable future. I just did a CTRL+F on their last few conference calls—zero mentions of shareholder value.
Similar in theme to my last post about corporate governance on boards, the longer I invest the more attention I pay to a lot of soft, qualitative characteristics to determine how management views shareholders and their own business. CEOs that come off as used car salesmen are an immediate buzz kill. We’re all human, we all make mistakes. There’s nothing wrong with owning up to them. Managers who are always positive and always selling come off as very intellectually dishonest to me. CEOs that are open about their struggles and why that’ll help build a better company going forward are more my vibe.
As of this writing, Wiedower Capital owns shares in IBKR and WFCF. This is subject to change.