Real life ethics. How do you handle board members who are just plain dumb? Dumb being defined as only having a loose understanding of a college level accounting course; unqualified membership so to speak. The scenario has to do with a commercial bank. Last year the board turned down a proposal to implement swaps as a hedge against interest rate risk. As a result, the bank was exposed to a massive loss that they could have easily hedged. Now the board is a bit more open to this alternative strategy, except they want a third party consultant to validate the idea. I’m sure this is not the first time the board has acted against the total shareholders best interests, I’m curious though as to what other companies do/have done?
ditchdigger2CFA Wrote: ------------------------------------------------------- > How do you handle board members who are just plain > dumb? Let them talk out of their @ss and then ignore them until they change their screename a couple times.
you either earn their trust and confidence, enough to be able to advise them honestly about their shortcomings, but with a solution proposal in hand. or if you’re on the other side of the table as them, build a coalition against them. or you sell the stock and cut your losses. its pointless butting heads against them for the sake of it - waste of time and energy and money.
farley - your hands move faster than your brain. probably a result of all those trips, over the years, to the bathroom with the magazine. try slowing things down a bit…he’s talking about corporate governance in this thread for instance, and off you go lollygagging…
hahaha…when I only read the title of this thread, I thought the exact same thing as farley013.
same as numi rohufish, loosen up!
me 4
yeah, ok, you’re right - lets destroy this thread with silliness
wow a whole new thread dedicated to me… awww!
ditch - find another place to camp out if you are working with incompetent, stupid people in positions of power. I’m not saying run from all problems, but I’m working with an “interesting” bunch right now and I’m going to sneak out before I become collateral damage in their shenanigans.
I should have selected a different title! But really, how does one ensure the board acts in the best interest of shareholders. From Level 1 it was assumed that only competent shareholders be elected to board positions.
XSellSide Wrote: ------------------------------------------------------- > ditch - find another place to camp out if you are > working with incompetent, stupid people in > positions of power. I’m not saying run from all > problems, but I’m working with an “interesting” > bunch right now and I’m going to sneak out before > I become collateral damage in their shenanigans. Luckily this is not my employer, but a fellow candidate explained the situation to me the other day. I can only imagine how frustrating it is. The main problem is when the word swap was brought up, the stigma of speculating/gambling arrived in their minds and they would not have it.
Sometimes it helps to point out that there are good ways to use derivatives and bad ways to use derivatives. Derivatives are dangerous when you are using them for their implied leverage to increase your risk taking ability. Derivatives are not so dangerous when you are using them to offset other risks (i.e. hedge, and the implied leverage is more about controlling transaction costs). Sometimes by saying “we are using them in way X, but not way Y, and you are entirely right to be nervous about using swaps for Y” is enough to get some movement. But remember that a lot of board members are concerned mostly about covering their behinds, which is why you have a consultant coming on to investigate. It’s not necessarily that they don’t trust you; they may just want to be able to blame a consultant if things don’t go right (which is better than having them blame you).
rohufish Wrote: ------------------------------------------------------- > farley - your hands move faster than your brain. > probably a result of all those trips, over the > years, to the bathroom with the magazine. try > slowing things down a bit…he’s talking about > corporate governance in this thread for instance, > and off you go lollygagging… I read magazines in the bathroom all the time. I’ve probably never read FAJ except in the bathroom. I read finance books in the bathroom. I bring my laptop in the bathroom. I don’t what this has to do with anything.
Joey, I believe this is what they call too much information. How’s the pushing going, by the way? (just trying to be neighbourly).
rohufish Wrote: ------------------------------------------------------- > farley - your hands move faster than your brain. > probably a result of all those trips, over the > years, to the bathroom with the magazine. try > slowing things down a bit…he’s talking about > corporate governance in this thread for instance, > and off you go lollygagging… Im going to go ahead and take a stab in the dark here and say that farley knew what ditchdigger was talking about. When i saw the topic title i too thought that it would be about AF members. Thats why the title is clever. Im relieved though that it wasnt about AF, and more about actual idiots in the world.
I had a friend who kept back issues of The Economist in the bathroom. I ended up spending a lot of time there. 
Seems like rohufish the self-exhalted genius was the only one who couldn’t figure it out. JDV – I took my laptop into the bathroom the other day, I was running tight on time for a meeting but really had to drop a deuce so I was reading a pitchbook presentation on the computer whilst taking care of business. Multi-tasking at its finest and most fragrant.
Let’s study like crazy for a simple, high-school-level, multiple-choice math exam!
farley013 Wrote: ------------------------------------------------------- > ditchdigger2CFA Wrote: > -------------------------------------------------- > ----- > > How do you handle board members who are just > plain > > dumb? > > Let them talk out of their @ss and then ignore > them until they change their screename a couple > times. I hope you are being sarcastic because its clear he is not talking about the same type of board you are thinking of. In light of your comment, when do you suppose you will be changing your screen name?