Shareholder value

Sydney cityscapeAre you a shareholder? It is hard not to be. If you have superannuation or a term deposit then at least some of your money is invested into business ventures on your behalf. In fact about the only way you can be totally share free is to keep all your money under the bed.

So now that you know you are a shareholder, do you know if you are getting shareholder value?

You can expect it because in most jurisdictions company directors have a legal obligation to maximise shareholder value. Indeed they can be prosecuted for failure to provide duty of care and diligence in this regard. Standard excuses such as denial, honest ignorance, paralysis from uncertainty, business as usual, and ‘we did what they did’ no longer pass muster in the courts [so I am told].

This is reassuring. The decision makers who get hold of our money are supposed to try everything they can to increase its value.

Only the truly trusting would leave it at that. Care and attention does not a dividend make.

Luckily you also have access to evidence to make your own assessment of investment value. When shares are purchased on a stock market, the buyer has information about the company she is buying into.

There is the share price, both the current and historical, that can be compared with other similar businesses.

There is the company website, press releases and, most importantly, there are the company reports. These are annual statements of how the company is governed and how it performed financially during the reporting period.

Sometimes companies will also release other reports on sustainability that say something about performance beyond the bottom line. These help claim values other than fiscal, the social and environmental performance of the firm.

Smart perusal of this information will tell you if the price you paid for the share, its current price plus any dividend, represents value now or if you might need to hold on a bit linger for the value to accrue. All good so long as the information the company releases is reliable and relevant.

Naturally there are rules that bind company directors to declare what they know and penalties applied if they don’t. This should make the evidence appraisal approach a sound way to assess value.

Many a wannabe Warren Buffet has made a mint on this evidence. Warren himself has made billions from an uncanny knack of investing in under valued stock. So with a bit of effort on your part, your shareholding can be valued and used to make a personal decision on value. Make the right buying and selling decisions and you appreciate shareholder value to yourself.

Now let’s complicate the puzzle a little.

Your superannuation is a long play. You don’t want to speculate with your retirement income so those annualised returns and the puts and short tactics of traders are not what you want. You need long-term value.

How can you determine this?

Well under the current disclosure rules this is very hard. The system is designed for short-term gain with returns to shareholders as immediate as possible. Hence value is what you get now, not what might come later.

This immediacy creates many problems. What if you want to know future value should you choose to hang on to your shares?

Historically share value goes up. At least that is what happens to the indices because, in general, as economies generate wealth over time indices of stock tend to rise. This is reassuring especially if you put your nest egg investments into many baskets.

But an index is an approximation from aggregating many stocks. Indices are poor predictors of what a given stock value especially over time.

Run out far enough and most things come and go. Remember when everyone had a Nokia? You would not have picked the trend toward smartphones from Nokia’s annual reports.

Shareholder value in the long run is guesswork, educated at best. You will never really know what that value will be.

And in the end what you value is the money you made.

TV dinners


not-a-TV-dinnerI think about far too many things.

My neurons fire at will and so often that thinking too much will be my terminal condition. It would be so nice to switch off all that chatter once and for all, but I fear that particular state of bliss is not mine.

One line of thought that began with a thought about banana pancakes [find the recipe here] led me to an especially odd food related suggestion, namely…

Has the TV dinner been a bigger destroyer of family life than the TV itself?

Along with many others I have always thought that TV watching rates — a little over 3 hours per day for the average Australian — have compromised us all. There is no time to talk over a bottomless cup of tea, to enter impassioned discussion of irrelevancies or to simply sit in each other’s company when in an average lifetime 18 years worth of daylight hours are spent in front of plasma.

The other day we sat with the kids [all now young adults but as parents we still cling on to their youth] and asked questions from Gary Poole’s book “The complete book of questions”. It was amazing how much engagement we all enjoyed as the TV wore a blank hangdog expression in the corner of the room.

It didn’t even matter that after a while the youngest son fell asleep. We all revelled in the discussion that is killed when the TV is on.

All this is well-known. We have had the research to prove that human interaction is an essential that no amount of TV can replace. And anyone brave enough to turn the TV off with more than one person in the room will confirm it to be true. The TV kills our biggest asset — the ability to communicate.

Except my question was really about the TV dinner.

In our house we have cream lounge furniture and were forced to ban eating on the couch. We also turn off the TV when dinner is served. The process of eating together without distractions is too important.

Yes, we eat together. Not only that but we eat the same food.

This is not some trendy new age thing. Everybody used to do it and Italians still do. Sharing food was critical to the bonds that kept us alive for as rather puny mammals we had little chance amidst the cut and thrust of the savanna without trust in each other.

Rather than foster that trust with talk as we share the products of our modern hunting and gathering we have let the TV dinner decide. Kids first, parents later — chips for them and something marginally more wholesome for us.

Produce is now so plentiful that it comes in pre cooked packages that only need the microwave. The dinner requires no preparation and no need for discussion. It can be warmed and consumed right there in front of the box.

The news and current affairs shows make lame substitutes for our own brains as we sit and chew our way to obese oblivion.

So here is my thought…

The TV dinner will bring on the end of the world as we know it.

Not the end of the earth, for no amount of human arrogance and negligence will bring that about, but the end of our current time of plenty.

My logic is this.

We sit and eat in front of banal reality TV where bachelors find love, cooks become chefs and big brother watches random individuals misbehave. This menu eats the time we could use to share experience and understanding, to communicate and think about issues of the day. This lost time of mental plenty will see us starve for solutions when we really need them.

Consequently, the TV dinner will bring on the end of the world as we know it because everyone will die of mental starvation.

The alternative is that we all succumb to smart phone neck.

Either way we are doomed.


boat-ThailandBucket in hand you turf water over the side of your tiny sailboat as it bucks into the squall. It is a desperate act. The next wave will undo all your efforts. A few more big ones and the boat will sink.

What to do?

You could stop the eager bucket work and resign yourself to a dangerous swim in the open water. There is no doubt that if you stop the remedial measures the boat will sink.

You could keep bailing out and pray that the squall will end. At least then your continued bailing would steady the boat, maybe even raise it a little in the water above some of the less terrifying waves.

A glance at the sky leaves you forlorn. There is not even a hint of blue sky.

You look behind you and there is a huge tanker casting a vast and shadow over you. Its prow cuts through the angry water ignorant of the buffeting the waves are giving your tiny vessel.

A man in yellow waterproofs hails you from the bow of the tanker.

“Do you need help?” he asks through a loud hailer.

You raise your arms in a shrug.

“We can throw you a line. Tow you back to port” the man says holding up a ball of string. “Unfortunately we have to charge you for our trouble” he adds.

You beckon for the string not really sure what the last bit was about.

“Don’t forget to keep bailing” the man says as he tosses the string over the side. “Your boat looks like it is about to sink”.

Illogically the string feels like a lifeline. It is surely not strong enough pull the sailboat back to port but there it is. You are attached to something big and strong.

Another wave dumps a load of icy cold water into the boat. Time to bail some more.

Your hands are stinging from broken blisters and there is no respite. Every time you rest the water level rises. The bucket and your effort is not enough.

You stare at the string. It is not even taught.

You look up at the man in the tanker. He smiles back at you.

Then it hits you.

Why in the name of the Gods did you set out into a heavy squall in a small boat?

Monkeys like peanuts

Full disclosure throws up some very interesting comparisons.

For example we know that in Australia the prime minister is awarded an annual salary of $507,338

Not a bad earn. There will be allowances and the like and not too many groceries to buy thanks to endless corporate dinners and executive lunches. Certainly beats the socks off the salary of the average Australian that is $72,800 currently the 5th highest in the world.

Immediate reaction #1 — You have to be kidding, that’s far too much to pay a politician


Now we take a gander at the salaries of company CEOs. This is possible thanks to the requirement of boards to state executive remuneration in the company annual report. And there are websites that collate these numbers into accessible lists.

Turns out that the average [as in mean] salary of a top 50 business CEOs is $7,485,000 per annum. Just 15 times more than the PM.

In 2014 the pauper on the CEOs list, languishing down in 300th place on the earnings ladder, made $869,000

Immediate reaction #2 — You have to be kidding, that’s far too much to pay anyone


In what universe are the top ranking CEOs making decisions an order of magnitude more important that those of the prime minister. He was elected to look after our interests?

Turns out if you add up the salaries of PM and his cabinet ministers it comes to roughly $8.7 million — 13 CEOs earned more than this on their own.

It doesn’t make any sense. But if you, reluctantly I hope, accept that this is the world we live in where an individual is considered important enough to earn seven figures to run a company, then you get…

Immediate reaction #3 — You have to be kidding, pay peanuts get monkeys


Accumulated knowledge

damselflyIf you wanted to read all that humanity knows about damselflies it would take you a while.

A Google scholar search on ‘biology of damselflies’ provides a list of nearly 9,000 research papers and this is just the start. Not every paper will have biology in the title, so search ‘damselflies’ and we are up to 13,000. Dig a bit more and there are over 68,000 publications containing information on damselflies and their charming cousins the dragonflies.

Suppose you really like these flying denizens of forest glades and decide to become an expert in their biology. By allocating 10 minutes to each publication — time to scan the abstract, a graphic or two and the key points of the discussion — then you would be at it for over 11,000 hours.

Make than 6 years of full-time work with no holidays.

In the good old days of the gentleman naturalist you might actually have taken on this herculean task. Your passion for damselflies would make the work a pleasure and independent wealth afforded you all the time in the world.

There was no need to produce anything from your all those hours in a wing chair by the fire. A mind brim full of detail on mating rituals, prey selection and peptide inhibitors was enough. That you could bore the pants off your dinner guests was simply a bonus.

Not so today.

Anyone afforded the luxury of 72 months with the accumulated human knowledge of damselflies would need a product at the end — a research thesis at least. And that thesis would only pass muster if it added to the already huge body of knowledge.

Your studies could not be completed in front of the fire surrounded by a library of leather bound books with the whiff of coal smoke across your nostrils. No sir.

After just a small amount of reading you would be donning a white coat and spending the rest of time in the laboratory dissecting the tiny abdomens of Diphlebia nymphoides, a pretty blue species native to eastern Australia. How else would you discover the true variability in digestive efficiency?

Only if you were really lucky would you have first donned hiking boots and trekked to the streams and creeks with a butterfly net to catch a few specimens for your analysis.

Even when the body of knowledge is vast our job is to add to it. Human endeavour is all about adding to the pile. We are addicted to making things bigger and better.

And boy is this mountain of human knowledge growing. The 869 papers on damselflies published in 2014 is double the number published in the entire decade of the 1970s.

Clearly damselflies are not central to any of the many economic or social challenges of our times. At best research might provide some details on how to avoid their extinction. So why do it beyond bald curiosity passed down the generations?

The reason for the burgeoning knowledge is simple. There are many more people than there used to be.

More people means there is more education, more universities with science faculties, and more students in attendance. The law of large numbers does the rest. Even the most esoteric topics will have more people interested in them than in the past.

So the body of knowledge grows, even for damselflies.

Pause for a moment to consider what this process of knowledge creation means. It is nearly impossible for any one person to have read everything we know about damselflies. Even if they were given a decade in the drawing room they might not get to all of it.

We have a searchable repository of the knowledge in the cloud that makes it easy to find specific facts. This is fine if you are already an expert and know what you are looking for.

But most people simply wouldn’t look. And if nobody spends any time in the winged armchair only the cloud will have the accumulated knowledge.

Et tu Brute

Caesar‘You, too, Brutus’, said Caesar forlorn with sadness and perhaps a hint of incredulity across his brow at the moment of his agonised death. At least that is what Shakespeare decided were the last words of the most famous victim of murder for political gain.

I have just watched all three episodes of The Killing Season on iView — all 234 minutes in one sitting. It was an excellent piece of historical journalism by the ABCs Sara Ferguson that through interviews with key players lays bare the extraordinary events in Australian Federal politics from 2007 to 2012. There were four prime ministers, two elections and an open disregard for the best interests of the country. Easily the modern equivalent of murder for political gain.

Specifically it’s how a political party can trash itself from within. More worryingly it shows a triumph of ego over integrity that destroyed the public’s faith in political process.

Watch it. Pay special attention to body language and facial expressions. Some feelings are hard to hide even for the professional spin artists.

But this post is not about that sorry saga at all. It is about an opinion piece by Eleanor Gordon-Smith, a writer and radio producer who teaches philosophy and ethics at the University of Sydney.

Gordon-Smith claims that the violent words ‘assassin’, ‘midnight door knock’, ‘execution’ and the like have no place in rational journalism. Nice try but a hollow attempt to dilute the message.

I am sorry. No one can airbrush this blemish. The Australian Labour Party destroyed its integrity and that of the political process in not one, but two ‘coup de grace’. Luckily no daggers were required to achieve the ends — a leader replaced by another that the people did not vote for — but the result was the same.

That labour supporters resort to such pathetic excuses is actually more worrying still. It suggests that despite being shown the truth they still fail to accept that their internal systems were flawed. Systems so dysfunctional that individuals without a mandate and not much more than inflated egos could bring down prime ministers. The labour party should say sorry to us for such irresponsible behaviour.

Instead of clutching at a semantic straw they should fess up, preferably with a resounding commitment not to do it again. And, should the party govern again, it will promise to put the best interest of the country before any petty internal squabbling.

While all this was going on the political right weighed in with dirty politics of their own. They trash talked and played every card they had, including aligning with the kinds of extreme views that they now claim to despise. They too came out of this period smelling bad — like opportunists without a moral compass.

Caesar did not expect that his friend Brutus would desert him, but he did.

In modern times the political dagger is no less lethal because it destroys far more than political careers. It bleeds away our faith in democracy.