Session 2: The End Game in Business

e okay folks can you hear me no okay so let's start with the big news of the week right which is what's everybody

talking about is it a corporate finance story now tell me the corporate finance story what did deep I mean now there's all the technology story what has deep

seek done that affects business revenues profits go ahead langage model which performs compar

but at a lower let's keep the national issue up wake up in invid on Monday is your story different right because until last

Friday the story was if you want to create an AI product or service what do you need to do invest in incredible expensive data centers with very

expensive Invidia chips and have access to immense amounts of data right that was the prevailing wisdom and it pushed up Nvidia it pushed up companies like Constellation Energy you saying why

because data centers require immense amounts of Power Talk of taking nuclear power plants out of moth balls and making them so these data centers incredibly powerhand and you have a

whole ecosystem there are companies that provide gas to these power centers and I mean so there's a whole array what's the essence of disruption you look at something being done and everybody tells

you this is the way it has to be done you say what if I could do it differently and cheaper and that is at the core of the deep seek story there's a lot of stuff we don't know I mean

let's rule out the things we know are just PR did it cost only 6.3 million to develop deep sick of course not it probably cost hundreds of millions

perhaps even a billion they probably use some Invidia chips along the way to help them out so it's not as if this was created by three people in a Hut on the

top of the Himalayas with no access to anything it was clear but even if it cost a billion that's a lot less than what micros meta alone spent what 65

billion on it but for some reason BCS seem to think that it's not enough to be impressive you got to be super impressive so there's this part of the

story only 6 million it didn't cost but it is I think the most impressive part is that two years ago at the height of a

year ago the height of ai's hyper everybody had bought into it right not just investors but all of the tech Titans said this is the way to do it

somebody sitting in a room in China said Why That's How disruption always starts why in my valuation class I'm going to Value inia I'm going to go do a valuation as of Friday because I've been

valuing in multiple times and I'm going to Value it on Monday could the value be different of course it's a corporate finance story that's going to roll

through the next 15 weeks and Beyond and for some of you pick a company in that space and I'm going to talk about your project it is going to be very much part of what you will have to deal with when

you talk about thinking about the right Corporate Finance actions for your company I told you everything is Corporate Finance so today here's what I'd like to do I'd like to start by kind of mopping up the

parts of the syllabus I didn't get to especially that unpleasant part where you actually have to get a grade I could lie and say it's all about the

learning I'd like to think that but let's face it you want a grade you want that grade to be a decent grade so I'll lay the foundations but if you remember last class I described this class as a big

picture class but I also said it was a applied class saying what does that mean I want you to be able when you come out of this class to be actually do things with the corporate finance tool not just

talk about them not just hire McKenzie to do them but do them yourself so everything in this class I'm going to apply in real

companies often in real time I've never used to case study in 40 Years of teaching and I think it's I don't want to pass aspersions on other people using case studies but I think it's a little

in my class when you've got 48,000 live case studies out there to go talk about a company and something that happened to it in 1988 written by a Harvard Business

School Professor who knows the ending to the story and acts like he or she doesn't know it so they can look really good in class because they could lead the discussion to obviously Time Warner

should not b a really you need a case study to show me this the prom live case studies is there're out of your

control and I think that's exciting that you create a case study and you don't know what the next thing is it's like going to a movie not one of those romcoms so you know what the ending is right in ver

three minutes you know the first one a movie where you don't know what's coming so everything in this class I'm going to apply on real companies because the class has to have a structure I'm going

to set them back in 2013 but I'm going to talk about these companies today first company I'm going to use in this class and I'm going to use it remember the investment decision the financing decision the Dividend

Decision is Disney why did I pick Disney because everybody kind of knows what Disney does right if I picked Alcoa you'd be struggling for the next 15

years tell me again what Alcoa does or Cisco what does Cisco do Disney you kind of know right everybody's seen Mickey Mouse and the theme parks and the

movies and the Avenger movies Visa it's a large US entertainment company and everything I do in this class I'm going to apply on Disney so I'm going to come up with a hurdle rate

come up with an investment for Disney that I'm going to make up a Disney theme park how would you assess it what's the right financing mix for Disney how much should Disney pay in dividends and tie it all up with how

does this play out in Disney's Val the second company I'm going to use is a company called Val anybody know what Val does

it's an iror Mining Company in Brazil it's the largest iron or Mining Company you saying why did you pick V to be as different from Disney as I could

get right old economy new economy Emerging Market develop market and to put a you know icing on the cake here V used to be a government-owned company

that's now a publicly traded company but the Brazilian government maintains what's called a golden share or the equalent of veto power over big decisions I want to talk about how

Corporate Finance decisions within V are going to be affected by all of those parameters the third company I'm going to use is a company called TARTA

Motors what does tart motors do obviously it makes cars what kind of cars it used to be Mass Market

automobiles it's been around India for a long time until in 2009 mtiv did a facelift a change which is it acquired

anybody know who it acquired Jaguar landro a global luxury auto company but the biggest story it's part of a family group which is not uncommon in Asia and

Latin America many companies are parts of family groups you're saying so what in corporate finance we look at investment financing and dividend decisions as if the managers of the company care just about the company but

if you're a company that's part of a family group there's somebody above you in fact with Tata the Tata group this is actually very physical they're in one

building in Mumbai called Mumbai house and each floor is top Executives of each company and the very top floor used to

sit right and tied up the family patriarch do you think anything happens anything big happens in the lower floors without it at least being passed by the top floor if you do you're being

incredibly naive and here's what it creates it creates decisions that companies can make that sometimes are not in the best interest of the company why are they doing it but actually work in the best interest of the group so I

want to talk about that conflict what happens when companies have a part of a family group and they have to think about what's good for the group as opposed theany the fourth company I'm

going to use is B have any of you used BYU come on if you're from China you have to have used B but Buu is a search

engine he's saying why haven't I heard of it for a good reason it's not a very good search engine but it dominates in China I still

remember my first trip to China I was fly the long flight to Shanghai I'm working on a blog post I have Google Blog I'm very oldfashioned so it's not been updated

since it's a very old fashion so I land in Shanghai I open up my Google Blog and it's not there so what the heck happened

I type in google.com and I don't comes up I so the $2 billion company disappear while I was in the air it turns out that

the Google search box is not technically accessible you can get through it by going through a VPN or double VPN which I have no patience for Buu is a Chinese

search engine it's a technology company it's a very successful Chinese technology company because there a lot of Chinese it's a big Market why did I pick B because I wanted to pick a Chinese company and I wanted to

pick a technology company this allowed me to do both I was running out of time for more companies so got both of the fifth company I'm going to use is doche

why first because I like horror stories and doche Bank reminds me of that teenager in every Horror Story the one I'm talking about you come to a

empty house it's dark and the teenager opens the front door and goes in he's saying what are you doing and she keeps going and it's

usually a she it's very sexist and they get to the entry to the basement there's a basement door and you can hear the sound of a chainsaw coming from the basement come on you walk into

a dark house there's a chainsaw sound coming from the basement what's any rational person going to do you're going to run out of that house as quickly as you can but that's not what this

teenager does she opens the door she walks down to the basement and the rest as they say is blood gore in history doche Bank does that every

single year right the basement is another Christ says this time I've learned my lesson I'll never go into the basement again next year they repeat the process so it's good to take a horror

story and say how did they get to be a horror story but along the way I also want to talk about how is corporate different if you're a regulated company

banks have the most regulations on what they can or cannot do for inst we talked about debt to equity and whe what you with the bank that financing mix question might be out of your hands

Regulators decide how much you can use and the final company I'm going to use is a not even a company it's a bookstore in New York that I've changed the name on called bookc privately owned

small bookstore why did I pick it because I want to take every corporate decision if you're the owner of a small business a plumbing

business an electrician how do you navigate those big questions so as we go through this class

you're going to see me come back to these companies and by the 15th week you're going to be as familiar with these companies as I am because they're

going to be the standards as we go through as we go through this process the question of course going to be thinking about is what will the grade look like I'll give away the game this

is a finance class we're all covered by pretty much the same distribution it's supposed to apply to all the other departments but don't control them so maybe you get 90% A's in the strategy

class that's not going to happen here it's 30 35% A's about 50 55% B's and there will be C's and D's for some reason people think that those letters of the alphabet have disappeared from

the grading system they're still there but you really have to try to get them how am I going to decide well I have subjectively if

you get it and I'll decide you've got it it's a or a minus you almost get it know it's a b if you you're trying to get it

it's not catching if you don't even know what it is and then clearly the D's and the fs are what are we talking about for 15 weeks hopefully you will not end up in that last slice I don't like to put

people there because then I've got to deal with the number of people who end up in that space so I'm going to try as hard as I can to keep you on the right side of this divide but here's what your

grade is going to be based on there will be a case and I have to change the due date on this because for some reason our spring break is a week later than it was and that happens to be spring break week

I'm not a sadistic enough to say your project is Du in the middle of spring break so I will change the date probably to the next week what is the case going to be I don't know I I haven't written

it yet I concoct a case maybe deep seek will be a good thing to build the case around but leave that to me so somewhere in about two or three weeks you will get

a case you'll work on it as a group you're saying what group start thinking about forming a group of people I won't put you in a group right so you basically you're saying what if I can't

find a group until last year I used to create an orphan list where you could put your name on and you could get adopted but then somebody last year told me that this was

very inconsiderate and that was hurting their feelings so I called it I will call it something else let's call it Corporate Finance

limbo isn't that the place in in the Catholic really where you end up in this middle space you're not sure where you are well right is it limbo limbo might

be the dance but you know whatever it is we'll call it something so you can go put your names in there and you will get either adopted or better still you can get other people just like you and

create a list of people in limbo but you have to find a group the case will be and you write a case report obvious State the OB be one report for the whole group and there'll be one grade for the whole group that's

somewhere in the middle of the semeer the other project is a project where you're going to pick a company so I want you to start thinking about a company and you're going to work on that company

through the class as a group each of you in the group has to pick a company I would like that company to have a common theme partly to so that you don't have to start so let's take a theme you could

take semiconductors what's going to be in that group you could have Invidia and that group you could all you know take Intel the two ends of the life cycle you're right one is of course this

company that could do no har no nothing wrong until last Friday and the other company that seems to be able to do nothing right right now it's good to have Divergence that's what you're

looking for you might throw companies that feed into the semiconductor space they don't all have to be but what you're looking for are companies that are

different so you're doing retail you might pick Amazon but pick marcard Libra which is a latinum

American online retail company pick Walmart a traditional physical retail company a Target if you want to or a

small retailer if you want to Niche retailer but you're looking for something in common but each of you will work on your company saying what's the group structure going to do I wanted to talk about what you find about your

company that's different from what other people find then ask why so if you find that your company takes on a lot of debt and another company supposedly space same space

you're a hospit your your group is hospitality and for of you picked hotels and the fifth picked Trav velocity and the sixth picked

Airbnb I can almost guarantee you before you start that airbnb's Corporate Finance decisions are going to be very different than Marriott's decisions and the class is not just about chronicling

numbers in fact I have a spreadsheet right now they'll do all the numbers for you you don't need an AI I could actually make it an AI this is about you reading the numbers and creating

narrative so if you haven't thought about it already start thinking about a group obviously got to get the group on I Define theme very broadly I mean last

last semester people one group picked Vice they did gambling tobacco cannabis they picked a can Canadian cannabis dog they had a lot of

fun a casino in there I mean basically you can you can Define your theme and pick a theme that you're interested in don't ask what will be easy ask yourself what

would be interesting hey because I guarantee no matter what company you pick the one there are two thing two types of companies I'd like you to avoid one

is money losing companies Young Money losing companies and I'll tell you why Corporate Finance becomes far too simple and here's what if you're a young money

losing company how much money can you borrow don't think too long if you're in a hold stop digging right you can't how much can you pay out in

dividends so you're going to be after you get through the investment section you're saying what do I do next my optimal debt ratio is zero and I can't pay dividends and you're going to come and complain to me and say I told you

not to pick a money losing company so pick a money-making company and avoid Banks unless you really want

to spend your life following Banks why because banks are regulated you have to understand you know what the difference is between tier one capital and tier 2

capital and if you don't want to spend your life learning that minutia because it's not interesting to you it's not the place you want to be so if you're a group and you really want to do banks or

insurance companies because you're all kind of strange Financial Service Company people come and talk to me i' be willing to help but in stay away from

it there will be three quizzes for this class the dates are specified there will be unfortunately given the size of this class I have zero flexibility in terms of moving the quiz

I can't give it earlier I can't give it later why because the quiz will leak right I have to write a fresh quiz and I am lazy and it creates all kinds of logistical challenges but I do

understand that life gets in the way that you might not be able to make a qu why because you have an interview I understand you came for an NBA to get a job and I understand that has to take

and if you do miss a quiz you don't lose the 10% it gets moved towards left in the class so if you miss the first quiz which is a 10%

quiz your second and third quiz will be worth 12% a piece your final will be worth 36% if you miss the second quiz then your third quiz will get

bumped up to 15 the so basically it'll always go forward why because otherwise you'll get strategic quiz missing right you know what I mean by that you do really well in the first two quizzes you miss the third quiz because it actually

weights your first two quizzes more I've been teaching 40 years no game I don't want you to game the system so basically but you will not the one advantage of taking all three quizzes now got to

throw a little sweetener in there otherwise saying why don't I just miss one of the three is in addition to learning all the material as it happens because that's what you have to do for

the quizzes I will take your worst quiz and replace the score in your worst quiz with the scores on your on your other two quizzes so let's take an extreme example you get a 10 on quiz one you get

a zero on quiz do why bad things happen to you that then third quiz you back to 10 I will take the zero and replace with the 10 right actually it'll be the average across the two quizzes and the

final exam but you get the picture right basically I will take your worst quiz and and give you the quiz on the average grade on the rest of your exams there is a final exam date I as I

said I'll put it up uh you know it's I think the week after but we'll have to you know I we'll talk about because if you have to leave early you might have

to have is so we we'll talk about if you have issues in timing we'll deal with that as well you can go through this page when you get a chance but it gives you good reasons for missing a quiz like

what I'll give you a bad reason I don't feel ready so here's my suggestion if you're really not ready and that's your reason at least do me the service of

coming up with a reason that sounds good right you know I'll let you I'm not going to ask you for a doctor's note I'm going to trust you we're adults here but adults lie to each other all the time so

I don't even know why we say we're adults here as if that leads to truthfulness now so if you want to miss a quiz I won't stop you but remember if you do miss a quiz you

lose that best of the three the worst of the three quiz option and you also miss learning for that quiz which you will need because the final exam is always a comprehensive

f it is open book open notes and open devices and the reason for that is how many of you have your lecture notes or an iPad or a computer

pretty much everybody right who prints off stuff so given that it's open book open Notes if I don't let you open your devices that that kind of defeats the

open Notes but you cannot use Excel on your laptop partly because you don't need the problems are written such a way that you can do the numbers by hand and

partly because you have 200 200 people trying to work with excel in a room bad things happen right computers break down

there's noises of beeping and so basically you can use devices you can do notes you can do you can do whatever you want you can summarize It Whatever work for your learning you can bring it in

this is not about checking whether you remember an equation it's about checking whether you remember there was an equation and where to find it in your notes right because which requires that

you actually go through the notes before and as I said every exam I've ever given in this class I think my very first exam is 1986 is online and solutions obviously are

online as well that's where the review sessions will cover the T will go through those problems on the group work as I said pick your

own group and police it yourself again this is where the your adults part of it comes in but I said the same thing to Manda graduates who are 21 years

old figure out the what I mean by police it is there's always this one person in the group you know the one I'm talking about who never seems to keep

up 14th week they still haven't picked a company and remember this is a group project your great drives on saying what do I do what's the Godfather there's some good suggestions

on how to get people to do things right get your message across don't make me the messenger right I mean it's I I would be fired if I chopped off

somebody's um Pet's head and put it on the that's what I saw in The Godfather but figure out a way to keep them in line okay that's about it for the class as as far

class participation there are no rules other than don't start yelling at each other across the room anything is fair gate so

if you want the problem with the class this big is you feel intimidated to ask questions when you start hopefully that'll fade you'll be more willing to

jump in so please do jump in you know contest something I say if you think it's you know that you have a different View I'm not going to be in the least bit insulted because you did that it'll

actually make it more fun the more you talk the less I have to talk which means it makes my job easier any yeah there's somebody already

jumping in yeah so the the casch 26 that's spring bre were you here so remember I said yesterday about physically being here but mentally you

might be gone have you been here right from the beginning of the class ask your neighbor what I just talk said about when the case is

Du okay so no we we'll let that pass right so in a sense it can happen it's a perfect example for why everything is recorded and online is because these moments will happen so don't take it

personally it does happen it's okay so no so let's turn to the first lecture note packet because now we're going to

start the process so this packet is about 300 and something pages so we're going to roll this is going to take you through the 15th session so if you got this packet this

15th session make sure you download the second packet because it'll take you through the rest of the class today I want to focus on something we don't talk about

enough in any of our classes which is it's a business school right all these classes and here's a core question what

is the end game when you run a business if you asked Milton fredman that question what would he have told you if you get a chance go and read Milton fredman's

1971 piece it's an opinion piece in the New York Times what would Milton Freedman say your endgame is is a business well he basically said you create a product or service that people

need that they will pay you for you make money on it and it's not just profits this year but profits in the long term you run businesses to make money that's

so mercenary I know but that's the end game and of course you get push back on that which is businesses have bigger objectives more purposes and in fact

much of the push back has been around for as long as time you know how Adam Smith described economics right anybody know

what what his description of Economics was Adam Smith of course six father of free market a lot of stuff for like the

Invisible Hand the Invisible Hand is a good way it's a gospel of Mammon is how he described it if you have no idea what Mammon is go look it up and Google it's not a good

description basically that you do things that could be essentially the between good and evil that you might walk very close to it but the essence of a business is your business but push back

has been around as long as business been around and in the last 20 years this push back has kind of acquired this special power behind it partly because

Harvard Business School threw its lot in there and they're always the first movers here and Harvard Business School exists for one reason and one reason alone to make consulting firms a lot of

money because they create an acronym consulting firms run with it and of course there are three forms this push back has taken the first is sustainability I'm sure you I'm sure

some of you have classes with the word sustainability in it some of you might have had titles at the works you had sustainability it's a big word out

there but the idea is you want to put sustainability presumably of the planet but I'm going to come back and push back of sustainable what because sustainability people just say sustainability

it predates business right Planet sustainability is something that environmentalists have fought for Green Peace for instance going back a century but this is Corporate sustainability and

we got to ask what are we sustaining the second is this notion of stakeholder wealth who's a stakeholder pretty much everybody right your customers are

stakeholders your employees are stakeholders the bankers are stakeholders Society is stakeholder that maybe this shareholder thing is too narrow that we need to

think about all stakeholders and the third of course is that acronym ESG and I'll give you my PRI when I

asked what I think about ESG I said it was born in santimon nurtured with hypocrisy and sold with sophistry

there's nothing good I can say about this Acron but we'll come back and talk about why because it sounds good right you're saying what is wrong with caring about the environment caring about society and caring about governance my

response is if you truly care about these things the last thing you should be doing is putting your trust in ESG so let's start with this notion of stakeholders who are the stakeholders in

the company obviously shareholders are stakeholders why because they Supply the equ Capital lenders are stakeholders because they lend money to a firm employees are stakeholders because they get the wages from the company customers

are stakeholders because they have interactions with the company products and services Society is a stakeholder in the form of a government because the government collects taxes from the

company and might pass rules and regulations and laws the company has to operate under even your competition is a stakeholder the only problem is they're a stakeholder with a very different

interest and you they want you to go down but everybody has a stake in the company and in corporate finance we Elevate one of these stakeholders to the

top of the pyramid and who do we put at the top of the pyramid and that is where the disagreement starts why would you this like it looks like we're

playing favorites right so does somebody want to tell me why shareholders get this special place where they get to pick the management they get to run the firm what is is it about their

relationship with the company that makes us put it put it put them on top of the fa you think A lender lending to a risky compan is not carrying if it to a risk employees might lose their job I mean

you could argue that the employee risk is actually much more tangible than a investor who has 50 other companies in their portfolio risk alone can't explain it

yep they just own The Firm so owners get to do whatever they want that sounds like you know if you have the power you should be able to carry it through that's a very brutal reason for

it okay let's get closer I think we're getting closer to the truth lenders lend money to the firm right but when you lend money whether you're a banker a bond holder what do you do you get a

contract that protects you y incentives directly align I think that's what it's going to come out of the contractual relationship I mean the alignment issue comes about because we put is on top

it's almost an output the question is why do we create that input lenders lend money to a firm they have a contract and in the contract what do they do they set

the interest rate based on how much risk they see in you they write covenants on what you cannot cannot cannot do sometimes they screw

up but they have a contract employees have a contract now we can debate whether those contracts have become too weak because of the you know because of weak ing of labor unions but

there's a contract right there's a wage you might say I don't like the wage quit and go work for somebody else your benefits basically

you get a contract do customers have a contract hey you buy a product or service and it doesn't do what you thought I mean you might have a tough time returning it wasn't from Amazon but

you can return it you can demand your money back and if they don't do it you can if you if you're willing to spend the time and the resources you can there is a contract every customer purchase is

an implicit contract does the government have a contract with a company right the T you can think about this whole process of the contract right you pay taxes in return the government

provides protection on your patent so basically there again we can argue whether those contracts have been weakened and exploited but there's a contract and even competition has his

own contract right especially in the US with antitrust laws you can go the the only group that does not have a contractual relationship is shareholders

what do they get they get whatever's left over let's be real let's suppose you invest and I tell you you get whatever's left over and I say go in now

I'm going to let the other people run this business how much are you going to get left over

nothing you know why universities never run a surplus they always run at a deficit because there is no they basically take the pie and say who's getting what slice of the pie and then

they run out of the pie and they go borrow more pies the reason we put shareholds up it's not because we like shareholders that they're preferred it's because they

have a residual claim and if you don't lend the Run let them run the company in the long term nobody will take that residual claim

so in practice we it is true we put shareholders in toob and then we go through this exercise where we start to narrow how we think about that objective traditional corporate

financing objective is to maximize the value of the entire business and then we ask managers go ahead and do it but here's the problem managers and somebody brought this up are accountable to one remember the

capital for a business comes from both lenders and shareholders managers and most companies tend to be accountable to which of those two groups unless you're into distress the

lenders really don't run the man manager so in practice instead of maximizing firm value sh managers focus on maximizing shareholder weth the portion of the capital that comes from so we've

already narrowed the objective the problem with shareholders wealth is who's going to estimate you could call in McKenzie every year to do it first you got to pay that Hefty fee

second it's objective so if you're a publicly traded firm that objective gets maximum gets uh narrowed even further in a publicly traded firm there is an observable number for the shareholder

weth right which is the market price so in practice when people talk about Corporate Finance they say the objective in corporate finance is to

maximize stock prices right and it's really not but you get there because pragmatically if you run a publicly traded company as a manager you end up

focusing on maximizing stock prices I'll make a confession that's terrifying because we know that that's built on the presumption that the

markets get this at least reasonably right right so I'm going to start with with this maximizing stock price which is a narrower version of maximizing the

value of the firm talk about why we picked it as an objective in corporate finance what can go wrong and horrible things can happen at companies when you

when you try to maximize stock prices and then talk about what do we do instead so there I'll bring in every possible alternative including

sustainability ESG and we'll pass them through the test of hey will this work better than maximizing stock prices so let's start

with what I think is common sense when you run an organization you have to you can have only one objective you can't have five objectives

you can have one objective in multiple constraints you say why can't I do all of these things because you will have to make choices say I want to maximize

Revenue growth and margins and value hey you know what that I I would like to do all of those things as well but if you run a business sometimes you have to decide which one you want to put on top so you have to decide tell me what your

central objective is and I'll let you have constraints now of course no you can disagree with the central objective I pick but don't tell me you want five

objectives that's why I don't like company mission statements that have seven different things they claim to do come on guys make up your mind what are you really trying to do what are your

constraints objective and constraints and if the company is traded focusing in stock prices comes with a bonus right what's a bonus it's updated

constantly so on Monday morning this week what happened in video St stock price it drops 16% let's make it real that's

580 billion dollar Invidia lost more in market cap on Monday at opening than the entire African Equity markets put

together the dollar values are staggering why because Market said the game has changed you know how long it's going to take accountant to come to that

recognition probably 2 and a half years it'll eventually percolate its way through markets you get instantaneous results and if if investors are rational

and that's a big if then that adjustment reflects what the loss or gain and value is so that's a nice thing about stock prices you don't have to wait around to say did I do the right thing you get

instantaneous feedback and people don't like this objective okay so when you look at this objective they always go

back to the worst case scenario and this is to me the strawman version of corporate finance that if you let Corporate Finance play out we're going

to have what I call the original corporatism which is 19th century you know Rockefellers and

carnegies essentially their endgame was they would maximize stock prices and the rest of the world be that my son's fiance's sister's husband

is a Rockefeller he's a real Rockefeller not the John D Rockefeller he'd be 150 years old he's a very nice guy but I was terrified when I first met him because I

had visions of John D Rockefeller coming through and I'm sure that John de Rockefeller was not a particularly fun person to hang out with I know Andrew Carnegie did amazing things every

library in the east coast came out of a Carnegie but Andrew Cari was not ruthless so the straw man is if you maximize stock prices we're all going to

be back at the end of the 18th century and you're going to have and there are people who play that out right look at the tech Giants they're going to be we'll come back and talk about why

this is not a repeat at the end of the 18th century but that's your and there what do what do the people running the company do they really exploit every

single other state C starting with lenders right they have the power to actually get rates at rates below what they should be

paying employees employes in the rate 1800s at zero protection you could work 16 hours in a mind probably didn't have any health

benefits died there was no nothing that you did customers remember I talked about contesting the company if you don't like what you get forget about that when

you're dealing with us steel and it's your only company around making steel you take it or leave it you saying what about governments these were so big that they did

governments did what they wanted them to do rather than the other way around they wrote the regulations what about the competition what

competition the original idea of creating a trust was to eliminate competition so if this is the word we're

going to end up in I don't want it either so as I listen to critiques of people of companies focus on stock prices I hear three broad themes come

through and if you're not if you're in the outside I would fault you for believing that these themes are what dry the first is that if you maximize stock

prices you can't take care of your employees that the companies that maximize stock prices care about their Financial Health must be doing it at the expense of employees and let's face it

every day you wake up at least one new story where this things to play out right and how does it play out Verizon lays off 20,000 employees and you keep reading the story

the stock price went up 3% and your mind you're making connection laying off employees must mean stock prices go up so if you care about maximizing profits

and value and stock prices it must come at the expense of employees of course that's going to be true in individual cases but let's talk about in

general is that true would you rather have worked at Tesla over the last decade or GM at the last

decade this is a no-brainer right would you rather work at Amazon or Walmart much as we like to complain about Amazon Amazon

workers are happier at Amazon than Walmart he's how do you know I interview all of them I went to glass door if you to glass door you can actually go see what what companies G

at and I and once I was there it was fascinating I going to say what the happiest places in America to work with are these the places that don't care about profits well I pulled up the list

and I'm going to show it to you and you can make your own judgments on this is not in your notes because I just pulled it up this morning

these are the happiest places to work at at least according to glas ban and Company why because you're probably being paid a ton of money have an expense account and you have crew Car

Wash I don't know I want to drive through crew I mean I say in andout Burger I do go to in andout Burger in California people are very happy maybe they get to eat unlimited Burgers and

Fries there's of course Invidia not Intel notice the Church of Jesus day you know that tells you also that employees are not made happy just by paying the mahay

that there's a cultural issue which can keep something that investment Banks started forgetting in the 1980s right because when I started in the 1980s when you walked into Investment Bank you

actually could tell where you were without looking at the name at the top because Solomon is full of these scuffy trade ERS none of them even if they wear a tie the tie was never nodded all the

way it's pulled down your shirt was pulled off and you walked into Morgan Stanley the tie is all tied up everybody's wearing the same suit it's almost like they went to the same store

probably Barney and they bought the store there was a cultural connection the advantage of that is people then self- select to be there even if they don't get even if they get paid less because they like the culture and

somewhere in the 1980s investment Banks they could they should compete on one dimension and you know exactly what the dimension is because you had interaction with them either in the interviews which

is we'll pay you more and I know I caution them I said if you play this game you know where it's going to end up right if that's the dimension then people are going to come

to you because you pay the most but then if D sha pays even more they're going to leave you and go to D shop because you created the game there's zero loyalty

left in this system precisely because you took it out so I'm glad you got the Mormon Church up there right that's the Church of Latter Day Saints because it kind of brings home that fact that

employee satisfaction no you're saying doesn't that show you should maximize no it basically says that if you look at employee satisfaction it has know very

little to do with you saying the right things to the rest of the world but treating people right and doing well as an institution and the Church is financially the healthiest church out

there the Catholic church is wealth is is also wealthy but it's all in the VCT and basement and stuff so it doesn't have the cash infl it's got a cash flow problem right now so don't but don't

lose any you know sleep over it they'll fix it somehow you know the worst places to work with

oh top is DHL Express second is United and I can attest to this because I have frequent interactions with United it's my Airline of

choice partly because it's the only airline that flies enough flights to San Diego that I can be on it but as you go down this list there aren't too many

healthy companies on this list right is there even a Radio Shack around I don't know what they must have found the last employee at Radio Shack who works at this Legacy stores what do you think

about and even that guy doesn't like radio Shin I'll wagor that if you walk into a department store anywhere in the you're not going to be surrounded by happy

people that these are people clearly there because they get a paycheck and they're not particularly satisfied so let's put this

mythology to the side that if you now ultimately if you really want to take care of your employees you got to start

by doing financially well right second you're told that if you want to maximize stock price it must mean you don't care about your

customers I should remember about 30 years ago I did a session for The Gap it was part of a top Management Group this was in the Gap was actually a successful

retail soore they kept opening new they just opened Banana Republic and Old Navy so they had a lot of money and the way you could tell is they had this management meeting at in

Sundance and even in Sundance is this Robert Redford Ran So it's a in a hotel room probably cost $1,000 a night so they bring in people from

different disciplines to talk to the top management I had the singular Misfortune of following the marketing Guru to the podium cuz just

before he left the objective of the Gap should be to maximize customer satisfaction then he left I wish he'd stayed cuz I got up to the podum said

this is the stupidest objective I've ever heard how many of you have actually shopped at the Gap see how few hands go up already you

can see why they're in trouble think about your collective experience shopping though and think about what you know what makes you satisfied you walk in it's nice if the store is well lit

and you know it's it's got so you walk in through and then you find the KHAK Keys you want is that all Gap cells I'm pretty much it right right in the siid you want in the color you want they

actually make khakis and colors other than khakis so don't ask me why you're feeling pretty satisfied right and then you get ready to leave and there's a scrimp on your

satisfaction which is you got to stop at the damn cash register to pay for your khaki so if you took the marketing

gurus objective to Heart what should you do take the cash registers out your sat your customers will be incredibly satisfied for a couple of

weeks and then you go bankrupt you think that is so absurd customer satisfaction matters but why does it matter because you want them to come back and I'm inan

I shop at Costco you know the great thing about Costco is you can buy stuff and return it there are people who bring in two-year-old refrigerators and I didn't like this

refrigerator Costco will take it back but they'll also take your membership away so that's the cost right Costco keeps its customer

satisfied and I like them for it but they do it because they want you to get a Costco membership and keep so I agree you want customers to be satisfied but let's be very clear you

want customers to be satisfied because you want them to come back to you to sell them stuff you could make customer Satisfied by selling stuff below cost but how long will you survive as a

business by doing and there's a final Canard about stock price maximization which is if you maximize stock prices you must be some kind of moral trog

Lite that's how I describ myself when I wrote first about ESG I said you're going to think I'm a moral trite but I'm okay with that I'll give you how the rest of the

World Views corporate finance and you're going to see this happen when you show up at Thanksgiving this year at whatever family Thanksgiving you're in you're going to tell them that you're

in an MBA program and people are already going to start to bring you down the morality scale then you say I'm going to go work for a hedge fund and now you're really scraping the bottle and say I

work in corporate finance and you're done because here's the vision of corporate finance that the rest of the world has I'm going to give you an assignment for this weekend I want you to watch

this movie called other people money it's a very old movie it's a 1980s movie and I'll tell you the storyline and going I tell you the story it's the most boring movie it's actually

a fun movie it's about a for lack of a better word at that time they didn't call them P guys a PE guy private Equity

guy who does a hostile acquisition of a cable company in New England you know phone cables

so the movie plays out where the acquir buys the company and basically it's a contest between the CEO of the company and this hostile acquir so think of the acquirer saying

he he wants maximize value I want to increase the stock price you know who played the aquire anybody know D Danny Deo so I want you to visualize Danny

dito it's always sun in Philadelphia remains one of my favorite shows but there's Danny Deo that's corporate finance you know who played the CEO of

the phone company Gregory PE Gregory peek you guys have never seen Gregory peek distinguish gray hair there's your corporate finance and

anti-corporate finance basically do you want to be Danny deito do you want to be Gregory peek right but in this movie the good part of it is it actually plays up the climactic moment for the movie is an

annual meeting and Danny DeVito gets up and everybody in the meeting is the employees this how dare you kill a

company it's been around a 100 years it's amazing company and he says look I am going to kill your company but it's not me that's causing

it it's a fact that you make cables that fiber optics is doing it to you I am the Messenger here but you know want I know private

Equity is AC Qui old and private Equity walks very close to that line there are things that private Equity does especially in healthcare that I think are almost unconscionable but for the most part if

you look at what private Equity does it essentially comes into businesses where what somebody is doing doesn't make sense anymore and they say you know what

maybe you should stop doing it it's easy to blame the messenger so if you're equating maximizing talk price

with being a bad person go ahead but I think in a sense there are a lot of bad people who destroy their companies and lower stock prices as well now goodness and Badness is a distribution you're

going to find pretty much all kinds of companies so these are the the facile ways you kind of push so I'm going to start with what I call the utopian World

from which Corporate Finance is born when did Utopia exist what is Utopia never existed so already I'm giving you a precursor that what I'm going to

describe in this world is going to be completely unrealistic but hang in there in the utopian World which Corporate Finance Bor here are the here's the way the world works first stockholders in

this world in publicly traded companies have complete power over managers I want you to think of a company you own shares in and think of how much power you have and already you can see Utopia moving

further and further away from you you own those matter shares complete power over matter are you kidding me but let's stay in this utopian world how do they exercise that power through the annual meeting and through the board of

directors remember in theory the board of directors works for the shareholders its job is to oversee management to make sure they're doing their fiduciary duty and what do managers do they're so

terrified of shareholders they go out and do the right thing know increase value for shareholders in this word lenders lend money to a firm and they write no prot

ctions and for whatever reason the company doesn't take advantage of all of those loopholes why because it come back to the borrow money it's a reputation effect and I can tell you stories about

how you can get away with it but in this world that always happens you lend money you don't protect yourself you never get ripped off this world you when as a company something happens to you you go

out to financial markets and you tell them what happened honestly and on time now we're really approaching the far

edges of Utopia right so what Universe in the world that I just described here's what would happen and I'll take a personal example I've been an Apple user since 1981 and I'd wait a

long time for an Apple laptop to arrive didn't come till the early '90s it's called the power book it was just Loosely a laptop it weighed like 15 pounds and got really hot on your lap

you get burns on your your but and and we were happy as Apple users it did have one small issue it's sometimes caught

fire this is not exactly a feature you go looking for on a laptop right spontaneous combustion not there not there not there it'll make your next presentation incredibly

memorable but your next plane trip could be a disaster turned out the batteries that Apple was using were overheating and just blowing up now in the world that I describe what would Apple do to

run out of markets right away and say guys our laptops are hot just leave it at that technically you're not lying and that's something to remember

about companies you don't actually have to lie you just have I told you have four kids you know I they don't actually lie to me but they sometimes hold back

the truth we all do it but the world that that never happen we all tell the truth to each other we're like blurred out everything and in return what do markets do they're

cool and rational about what you just told them I'll describe a trading grou in this world it'll be full of intellectual people have any of you been in a trading

room full of intellectual people right who have long conversations about the long term but really but in this world that's what

happens and finally in this world there are no social costs what's a social cost anybody want to tell me that because or in economics we

call these externalities right what is it nobody wants try go ahead on the rest of society right but we have to finish the costs that are created for society that you can't

generally Trace back to the companies right because you can trace it back there are ways to make the company pay but generally social costs are cost that

are you know and already you're saying but only bad companies create social costs everybody does that hot dog stand out sir I briefly considered using that

as my six business it's greater social cost for me it's been around 38 years I know the guy really well but I often walk down

that that that uh that sidewalk and he's cost me like 15 steps every day for the last you're saying this is so

petty hey think of the thousands of people who walk down multiply by 15 Steps is right in the middle of the sidewalk sometimes you slip on ice

because you can't get that's a social CA companies when they run businesses create ca for society and we'll talk about why that's an issue but in the utopian world well

there are no social costs why am I doing this because in economics when you have a problem you can't deal with what do you do you assume it away you put yourself on an

island let's live it because what we're trying to do is make the world safe for maximizing stock price in what sense I want you to maximize stock prices the right way what's the right way you got

to go out and pick good Investments make good products that so much work because you can go increase stock prices by stealing from your bond holders by

ripping off your customers by not paying taxes that you should be paying in this world none of that stuff happens but let's start with that world because in a sense it's going

to give us that that standard that we can compare so in the utopian world what do companies do they maximize stock price because markets are efficient when you maximize stock price what do you do

you maximize stock holder wealth so we got rid of that problem lenders are not ripped off so basically when I maximize stockholder whether it's not coming from ripping off my

lenders this world is a utopian World employees are paid a reasonable wage because you want them to work you don't exploit them same thing with customers you basically provide them the product you

would you get a reasonable price you pay a fair share of taxes you follow the rules and the regulations and it's like a Disney movie everybody lives happily ever

after I don't know about you but I don't live in this world every one of those assumptions I listed is patently unrealistic so let's go to the real world and all hell is

going to break loose let's start with the first linkage what did I say stockholders have complete power over managers well not really and as you go outside the US it

gets worse Japanese companies Indian family group companies and we talk about the two mechanisms annual meetings and Boards of directors and why they don't work and if shareholders have little power over managers what do they do they

put their interest often ahead of shareholder interest it's human nature it's not because they're bad people so why do you have an apartment on Fifth Avenue if you're the CEO of a company

you can give me all kinds of you know this is for convenience but you don't need a penthouse apartment and you could get a hotel room in in Midtown manatt

good room too managerial interests get ahead we'll take look at examples of that lenders lend money to a firm and you don't protect it so what's going to happen

you're going to get ripped off it's not a question of whether it's a question of when do companies sometimes lie to financial markets

absolutely but all too often it's not that they lie but that they TR to delay bad news manage the flow and in turn markets are not Angelic either right

that cool rational Market is not exactly the trading room what do you think happened on Monday morning you think people over the weekend work through the expected Revenue growth for Invidia over

the next 20 years and what deep seek could do to their margins think so they came in and they're sold and finally do companies create

social costs absolutely do they sometimes create social business that too it's a messy word and I'd like to take

each of these linkages and take a deeper look let's start with the first linkage in theory shareholders have complete power over managers how do they get

there by through the annual meeting of the board of directs let's start with in practice why those two mechanisms don't work let's start with the annual meeting

how many of you are shareholders in publicly traded companies okay so quite a few the rest of you had to sell your shares to pay the tuition I would guess I understand

right how many of you have been to an annual meeting one couple people that's good I've never I own shares in 40 companies I've never been to an annual meeting and

I don't intend to start I'll give you an example I own shairs in Coca-Cola I've never been to an annual meeting because think through the proc what this involves I first have to fly to Atlanta it's an extraordinarily

overpriced flight from New York New York and even more so from San Diego let's say it's $600 I have to stay in that peach whatever section of Atlanta this is really depressing part of Atlanta

where everybody seems to leave at 7 p.m.

that'll cost me another $600 add up the meals and the other stuff $1,500 round trip there goes my profit for the year right for most of us

it makes no sense to go to an annual meeting but in theory I can be there without actually being there I'm not being mist ious but as shareholders in a company what do you usually get the

right to do you get a proxy the old days it actually used to be a physical document you got in the mail I remember getting that document and you know what I did with

that document if I was feeling environmentally conscious it went into recycling if not it went into trash I had zero interest in filling out that proxy because most of the time I was

asked to vote for people I never heard of or in Pro or things that would come up which I didn't really care about you know that I'm not alone that 60% of

proxies never get returned but those are thousand shares in Coca-Cola right so when I threw it in the trash or recycling what happened to the Thousand votes where does it go where do they

go in much of the world when proxies don't get voted those votes go to income incumbent managers see what this process does right it's like having an election where

the incumbent gets the votes of anybody who doesn't show up to vote no us incumbent would ever get defeated right because I think what 49% of people show up to vote you start with 51% you don't

even have to vote for yourself you've already won it's a process tilted towards incumbents which is one reason when you look at votes at annual meetings it's very very difficult not

impossible talk about what might tip it over the edge to get to 25 when you see a 30% no vote against management at an annual meeting that must mean that pretty much everybody voted voted

against management but they started with 70% I just remember when JP Morgan had this issue with Jamie Diamond what you know there was a pro

proposal to put him back as the chair of the board again because he' done the right corporate governance thing and stop being chair of the board but he wanted to be chair of the board why because he's a bit of a

megalomaniac so opposition you know sh said that's not right the corporate governance thing you did the right thing you start so it comes up for a vote and there a 36% no vote and 64 so the way the Wall

Street Journal report The Wall Street Journal article on it reported was Jamie Diamond wins because 64% of the people voted for him the shareholders voted for him not

really it's very difficult to get a no vot at a at an annual meeting right so most of so it's not just small store but but he's saying what about the big

institutional investors what what about them for the most part you know what they do they vote with incumbent

managers it's easy path and I don't blame them at somebody from the Vanguard index funds last week in an Executive MBA class that I taught it

Stern if you're in Vanguard how the heck are you going to show up a older meeting said every company own shares and then actually throw your weight around first it's not your money to throw the weight around with and second that's a lot of

companies most institutional investors vote with their feet which means if they don't like a company guess what they do they sell their shares and move on they don't stand and fight so if you look at

an annual meeting not only do you individual investors not show up institutional investors you know essentially what with it's very difficult to get something going it's incumbent

manag so if you don't like the way a company is managed and you're saying I'm going to go do something at the annual meeting all the more power to you but you're embarking on a mission

that is going to be really really really difficult to Wi we'll talk about what might tilt the scales but most annual meetings and this gets even

worse outside the US in Japan for a long time income managers used to hire Yakuza Yakuza are these gang members they' show up at annual meetings and this actually happened

because there was an activist investor in the US showed up at a Japanese company and he wanted to question management every time he stand up to ask a question group of people in the back would get up and yell as loud as they

could theyes and you would never get the question through in Europe it's a different kind of problem I remember this company called tattingers have you heard of it

know it's a French company in very makes very expensive stuff that most of us can live without it used to be a family-owned company but it's now a publicly traded company and the CEO of

the company is Claudia taton you're saying that's a coincidence she has the same last name it is the the family and this was an annual meeting this activist investor from the US called Asher

Edelman gets up and he asked a question which I thought was a very reasonable question he said I noticed that tat just the company owns a lot of

chat who lives in these shat she refused to answer the question after the meeting she had a press

conference she said no I am Hur that that such a rude question would be asked of

me I Now understand why they the guillotine the French Revolution this is this is about as

separated from what you should be asking as a CEO of a publicly traded company and for the longest time European annual meetings were exquisitely well-managed

and well behaved Affairs because you didn't ask those rud questions that's for the Riff Raff annual meetings are tough to break through for lots of different reasons

and you can see why they're say what about the board of directors what about the board of directors I know many of you might have worked at publicly traded companies I want you to go back and look at the

annual report for the company you worked at and look at the board of directors for your company then ask yourself the question comes up with these names did they pull them out of a phone book is

there even such a thing as a phone book in most companies for a long time you know who came up with the names right the CEO

did I remember when John Mack became CEO of Morgan Stanley the first three people that he pulled for the board were members of his country club and I

entirely understood what was going on let's say you're the CEO of a company want to put together a board of directors I let you pick the next you have two choices you can pick the 12 most informed intelligent people who ask

you tough questions and keep you on your to that's Choice one the other is you can pick the 12 most sloshed people at a bar and put them on your Port which one's going to make your

life easier you have enough martinis flowing you'll never get asked a question that China investment you lost 6 billion not a problem bring me another

Martini Boards of directors are often composed of people that the CEO picks I know there's a nominating committee now but if you're operating under the delusion that that nominating committee

doesn't check with the CEO before they put a name on then you're not hanging out with the people who tend to be directors at companies so if you look

at I don't know why my the clickers work in practice what happen the pick directors second you're saying but these directors must be shareholders in the

company right technically they often are but you know how they get the shares the company often gives them the shares they don't even make them buy them and you buy 2,000 shares in invate trust me

you're not thinking like a shareholder you're thinking like a board member and it's astonishing how many companies have other company CEOs on their board

I've never understood how somebody has the time to be the CEO of a company and sit on the board of another company the bottom line is it's you'd

love to believe that Boards of directors act as a check on management but they don't there a couple of reasons one is I think you've seen Robert rules of orders

I think this must this guy was some kind of a pun person who had some psychological issues you wanted to meet out punishment it's a way of keeping order it's a very very so if you want to

run a meeting you want to make sure that you control the meeting you bring out Robert's Rules of Order that's out of order requirement of staying with order

the second is if you're in a room with 11 other people you feel this urg to be a team player so if you have a question you

sometimes hold back because said that might not be a nice thing to ask I know in the last 30 years we paid lip service to corporate governance it started with the scandals

of the late 90s lip service in what sense you know this this entire law called sarban Oxley that was written to make boards more independent key word is

independent and it actually accomplished that objective and you can't have Insiders on the board you can't have your nephew your niece you can have loopholes to get them there but generally it pushed Independence

and the Assumption was if you have an independent board it will be an effective board and the two are very different requirements right independent just means you don't have this connections

conflicts of interest effective means you're willing to push back so 30 years after s it's actually 23 years since SB Oxley guess what corporate governance doesn't seem to have changed even though

youve got this immense law that was passed you're saying why I think that there is a psycholog iCal issue you're in a room you're a director at Goldman Sachs the CEO of

Goldman Sachs gets up and says this is what we're doing at as Goldman Sachs psychologically you feel the need to say that guy is the authority figure

that person is the authority figure he or she must know more about the company than I do I'm not going to push back you you know what if you really want to

make boards more effective maybe we need to learn from the Catholic church I let's give let's give it credit it's been around 2,000 years it's figured out a way to survive and prosper because the

Catholic church had a problem in the four in the I think the 14th or the 15th century too many people were becoming Saints you follow the process for becoming a saint the Catholic Church somebody comes up with the name then a

whole group of people come up with all these Miracles and they go to Rome and they present the evidence and then Rome says yes no and it turned out that too many

people were becoming Saints because there was this group pushing for a saint but there was nobody who had an incentive on the other side to mount an argument against St so too

many people going through so the Catholic Church created a position and I love the name of the called The Devil's Advocate the devil's advocate's job was

to push back against the saood people it's a miracle no no not a miracle the water would have come out of the ground anywhere brought this person back to life no the person was just sleeping to woke him

up I proposed this a couple of years ago in a corporate governance session nobody took it on I said what we need is the equivalent of a devil's advocate in the

board the CEO you have a counter CEO the CEO brings out Bankers to say this deal is a good one the counter CEO has given the resources to H his bank that deal is a bad one I know this will bring the

process to a grinding halt but independent boards are not necessarily effective boards so I'm going to show you as the end of the class the worst board I've

ever seen at a large publicly traded company in history I'll start the process there complete the condemnation next next

session this was the board created at Disney in 1997 anybody remember who the CEO of Disney was 1997

a guy called Michael eer guy with an ego so large that he could be in a big office by himself and it felt crowded he was an imperial CEO you know

what an imperial CEO is like Caesar right make decisions affirmation follows and this was the body he put together so let's start

with Michael Eisen says he's on the board which is not unusual see is on but he's also the chair of the board I've never understood this you chair a board that's supposed to oversee you and tell

you whe know it sounds like there's a conflict of interest but that used to be common in 1997 that was standard across us companies but let's go through some of the other names there was Miss RTO

Bowers you saying who the heck is she it's a principal of an elementary school in La he saying this is good Disney's a kid oriented company she's around kids all day this might have been pure coinci

but she happened to be the head of the elementary school that Michael eisa's kids went to complete coci said that to the South right let's keep going down

there is Father Leo odonovan any Georgetown this is good to have a religious influence on this hean board right again it might be pure coincidence

Michael eisen's son had gone to Georgetown he sat on the Georgetown Sport and he made a substantial contribution to the Georgetown ow set

that aside pure coincidence again here's my favorite one irin Russell attorney at law you say what do you have against lawyers a lot but this

is not the forum for me to discuss that he was Michael eisner's personal attorney how the heck do you get away with this I'm going to put my lawyer on the board and he's going to be

independent it's nice to have your lawyer in the room all the time saying don't answer that question Mike take the fifth on that one Mike but don't don't tell me he's going to be an independent

person and to top it all off Sydney poer great actor right he actually made the list of top 10 directors in 97 but it was a wrong list

list of directors who missed the most meetings so guess who's coming to dinner is guess who's not coming to the meeting

today and he chaired the compensation committee this is what a rubber stamp board looks like you know what rubber

stamp board does basically the CEO says this is what I want to do rubber stamp I want to acquire a company to rubber stamp I want to buy ABC rubber stamp and it's more common than you

realize so here's my first task for you and this is why I want you to pick a company early pick a company and for the moment you might not have picked the final company pick any company you're interested in take a look at the board

and ask yourself how effective don't get distracted by how diverse the board is how independent the board is all those are diversions how effective is this board going to

be because they have a singular task act as a check and manager so on Monday we will continue with this discussion corporate governance but by then I hope you're in a group and I hope you picked

a company so start that process this weekend