THINKING ABOUT MANAGEMENT?

“You cannot make a quantitative deduction to allow for an unscrupulous management; the only way to deal with such situations is to avoid them.” Ben Graham

“Getting to know the management of a company is like getting married. You never really know the girl until you live with her. Until you’ve lived with a management, you don’t really know them to that same degree.” Phil Fisher

"Never wrestle with a pig because if you do you'll both get dirty, but the pig will enjoy it." Charlie Munger

“My theory, is if it can’t stand a little mismanagement, it’s no business.” Charlie Munger

“Study the company's management, the leaders, their track records, and their goals." Roy Neuberger

“If you’re going to make investments you better be a decent judge of people and human beings.” Peter Keefe

"Management is one of the most important factors in the evaluation of a leading company and it has a great effect upon the market price of secondary companies." Benjamin Graham 1955

"The first thing is, is the management decent and honest?” Julian Robertson

“Julian Robertson was maniacal on the importance of management: ‘Have you done your work on management?’ Yes, sir. ‘Where did the CFO go to college?’ Umm, umm. ‘I thought you did your work?’ He wanted you to know everything there was to know about the people running the companies you invested in.” Lee Ainslie

"If management isn’t focused on maximizing long-term per-share value, then no matter how good your analysis is of the business, the decisions being made can disrupt the rising path of value you’d otherwise see in the static business." Bill Nygren

"It's hard to overemphasize the importance of who is CEO of a company." Warren Buffett

“[My core stocks] all have managements of above-average capabilities by a wide margin.” Phil Fisher

“I think management is incredibly important. I’ve been burned many times when I didn't pay enough attention to that. Businesses, as I already told you, are very fragile. Most of them don't survive very long. Leadership, both depth of leadership as well as quality of leadership, matters a huge amount.” Mohnish Pabrai

"We do not wish to join with managers who lack admirable qualities, no matter how attractive the prospects of their business. We've never succeeded in making a good deal with a bad person." Warren Buffett

“I never want to pay above intrinsic value for stock – with very rare exceptions where someone like Warren Buffett is in charge. There are people – very few – worth paying up a bit to get in with for a longer term advantage." Charlie Munger

"Quality of, and incentives for, management are also very important. We look at management ownership to see whether their interests are aligned with the shareholders’ interests and we look for their compensation levels to be reasonable." Leon Cooperman

“We not only look for a great economic castle, but we look for a great knight in charge of that castle. Because that’s important. He’s the one that throws the crocodiles into the moat and widens the moat over time.” Warren Buffett

”In management you look for ability, trust & character.” Warren Buffett

“Chief executives who themselves own few shares of their companies have no more feeling for the shareholders than they do for baboons in Africa.” T. Boone Pickens

“We spend a lot of time trying to understand, ‘Is the management team focused on maximizing long-term per share value?’ How do they think about putting capital into share repurchase when their stock is cheap? What are their personal economics or how closely tied are they to what we as outside investors benefit from?" Bill Nygren

“We put the highest emphasis on handicapping management. Objectively, we’re looking for meaningful management ownership and/or shareholder-oriented compensation packages.” Morris Mark

"My research [on management] always starts with the proxy, which I’ll read even before the 10-K. I want to know where the incentives are and can often qualify or disqualify a company for further research based on what the proxy tells me on that front. I have no interest in golden parachutes or egregious stock-option programs. If more than 10 pages of the proxy is devoted to executive comp, it’s probably not a company I’m interested in." Frank Martin

"One of the things I try to do, when I look at a corporate account is the first rule, it’s the map. It’s not the territory but now I’m trying to see, does the map understate or overstate the territory? Is this, am I getting clues from these accounts that suggest that this management team and their accountants are trying very hard to show less value than what is actually there or the other way around. We would see that through, for example, their choices in depreciation policy. Are they depreciating their assets quickly, which would imply that they’re trying to be conservative in what they show or are they trying to depreciate their assets very, very slowly. In their acknowledgment of revenues, are they taking, are they acknowledging revenues at the very last moment when the client has paid cash or are they acknowledging their revenues when the client has just indicated the intention to buy? What we’re looking for is divergence in which the divergence is in our favour." Guy Spier

“Of course, we have made mistakes when assessing management teams. But, in our view, trying to spot a great manager remains a game very much worth playing.” Marathon Asset Management

“Good management gives you upside options for free.” Mohnish Pabrai

“Choosing great management teams is a key ingredient to hitting a high batting average.” Steve Major

“We should only invest with A-level management teams. With such a concentrated portfolio, we can’t afford to partner with anything less.” Fred Liu

"In making both control purchases and stock purchases, we try to buy not only good businesses, but ones run by high-grade, talented and likable managers." Warren Buffett

"In my books, I’ve always placed the emphasis on the importance of the management team in selecting companies… and yet, I didn’t do it enough." Philip A. Fisher

“When you asked me about characteristics I look for in stocks, I mentioned quality of management is the most important.” Lee Ainslie

“Confine investments to companies the managements of which have a highly developed sense of trusteeship and moral responsibility to their stockholders.” Phil Fisher

“When large enterprises are being managed, both trust and rules are essential. Berkshire emphasizes the former to an unusual – some would say extreme – degree. Disappointments are inevitable. We are understanding about business mistakes; our tolerance for personal misconduct is zero.” Warren Buffett

“Assessing management is the fundamental exercise, more than any financial calculation. It’s what we intend to spend most of our time doing, because when we marry a strong business model to a top-flight and committed management team, the potential to create value over time rises geometrically.” David Poppe

“While assessing management is perhaps the most important thing we do, it may also be the most difficult. It doesn’t lend itself to spreadsheet analysis.” Peter Keefe

“Our biggest mistakes have always involved overestimating management." Bruce Berkowitz

“I’d go so far as to say that all of our mistakes over time have been at least partly related to misjudging management or the board.” Peter Keefe

"Most important is the character and brains of management. Poor management can ruin even a good proposition. The quality of management is particularly important in appraising the prospects of future growth. Is the management inventive and resourceful with a determination to keep itself young in a business way? Or does it have a sit and die attitude?" Bernard Baruch

“Marathon puts enormous weight on the assessment of management.” Marathon Asset Management

"The quality of management affects the bond coupon only rarely - chiefly when management is so inept or dishonest that payment of interest is suspended. In contrast, the ability of management can dramatically affect the equity 'coupons'." Warren Buffett

“I really do believe in one premise - that management teams, in terms of their impact on value creation, is systemically underappreciated, both to the good and the bad.” Andrew Halvorsen

"Franchises can tolerate mis-management. Inept managers may diminish a franchise's profitability, but they cannot inflict mortal damage... a business, unlike a franchise, can be killed by poor management." Warren Buffett

"We tended to buy the stock of companies that had franchises and good management." Roy Neuberger

“Mismanagement also can bring no end of trouble to otherwise fine businesses.” Frank Martin

"There are more problems with having the wrong manager than with having the wrong compensation system and any compensation sins are generally of minor importance compared to the sin of having somebody mediocre running a huge company." Warren Buffett

“The single most important variable for us when we’re looking at companies, is assessing management.” Josh Resnick

"You need both great management and a great asset. Having one or the other is a bad recipe.” Richard Perry

“From our perspective, an ideal management team is one with a clear strategic vision, a thoughtful and pro-active approach to capital allocation, and a strong alignment with shareholders.” Dan Loeb

“I like to talk to management, assess their abilities and personalities, and understand their way of thinking so that we are on the same page. I am always friendly, and my intention is to look them in the eye and get a good sense of their character. This may seem an old fashioned way of judging people, but it’s very effective.” Thomas Khan

"I do talk to management of many companies. I like to figure out their human values, the culture they nurture and their long-term goals." Francois Rochon

“By the time we meet with management we have done extensive research on the companies and most of our questions have been answered. So we are rarely surprised after speaking with management. When we meet with them we focus on the company's culture and how it has evolved or taken shape over time and their long-term view of the business. We want to make sure that the CEO and his or her team are putting the long-term health of the business ahead of short-term results. It is a red flag for us if we ask a long-term question and get a short-term answer.” Dan Davidowitz

“Management’s attitudes and abilities are critical over [our] such long time frames. They must be able to see and to execute on the opportunity. One of the benefits of being known as a genuine long term investors in businesses, rather than stock market traders, is that company managements seems more and more willing to engage with us on these questions. Further, we look for management whose time frames are properly aligned to ours.” James Anderson

“Investing is all about the future. You’re spending all you’re time trying to predict how a group of people are going to work. Leadership is unbelievably important, much under-estimated in my opinion. In a small company it’s everything. One of the things the characteristic of a leader has to do with is culture. How you they treat people and what are their truest values - it’s what drives decision making over long periods of time. Strategies can change, but culture is who they are. So if you have a leader who is dishonest, doesn’t believe in the truth, or who doesn’t treat people with respect, it’s a very tenuous, shaky situation. You will get terrible results.” Tom Steyer

“The importance of good management is almost universally underestimated, yet it is one of the most crucial determinants of a company’s intrinsic value.” Todd Combs

“A lot of times it comes down to judgment about people. Do I believe the people who run this business to be honest and credible? Or do I think they’re promotional? Or do I think they’re delusional? Or do I think they’re trying to raise more money and therefore they want to pump things up?” Glenn Greenberg

“One of the things I have learned over the years is how important management is in building or subtracting from value. We will try to see a senior person and prefer to visit a company at their office, almost like kicking the tires. You can have all the written information in the world, but I think it is important to figure out how senior people in a company think.” Lou Simpson

“I have come to realize over the years, at least as important as any other, if not more — is the quality of management.” David Polen

“We are big fans of management teams that ignore Wall Street.” Jake Rosser

"We visit their [Management’s] offices. Going to someone's home tells you a lot about the person, and so does a mahogany paneled CEO office with a private bathroom." David Abrams

“A CEO of an industrial company who wears expensive shoes or a Gordon Gekko outfit is more likely to enjoy the company of investment bankers than spending time visiting factories or customers. Signs of vanity are generally off putting.” Marathon Asset Management

“We spend a lot of time getting to know the stewards of the companies in which we invest to ascertain their personal priorities. Small observations can sometimes provide a clue. A CEO who won’t answer tough questions directly is a warning sign. A deeply tanned CEO wearing a lot of gold jewellery is not likely to be someone we feel we can trust.” Glenn Greenberg

“The opulence at the head office is often inversely related to the financial substance of the firm.” Charlie Munger

“If there is a serious question of the lack of a strong management sense of trusteeship for stockholders, the investor should never seriously consider participating in such an enterprise.” Phil Fisher

“One mistake I made earlier in my career was investing in questionable management teams, believing that a cheap valuation more than made up for management. We just don’t expose ourselves to that risk anymore and seek to invest in and support high quality people.” Yen Liow

“It comes down to doing business with people you trust. We pay careful attention to all management communications. Does the CEO write the shareholder letter himself or herself? Do they tell you where they’ve been right and where they’ve been wrong? Do they talk about what’s difficult about the business? Do they articulate how they allocate free cash flow, and do so in an owner mentality? Are the key benchmarks consistent? We worry about companies that one year focus you on adjusted net operating EPS, then the next year on EBITDA margin and the next year on something else.” Adam Weiss

“There are very few companies where the CEO writes the annual report. Maybe we read 300 to 400 annual reports a year as a team. If you were to only invest in those companies where the CEO wrote the letter and you would view the letter as a useful information document not a marketing document, I can’t think of a single company in that universe that’s been a bad investment. Not one.” Chris Davis

“I learned as a young analyst that management is not a given. It’s dynamic. The management team changes, individuals change, policies and procedures change, unforeseen challenges develop, opportunities occur. I think you’ve got to look people in the eyes, talk to them, and get a feel for their personality. To me, investing is all about people. Good managers doing a great job. I want to know that management is going to achieve its plan, and I need to make a judgment on that. There are people you end up trusting and other people who, when you walk out of their offices, the hair on the back of your neck is standing up. I think good management is vital.” Bill Stewart

“The area where we've gotten less comfortable because we don't think we've been very good at it, I would say would be in the areas where you think a stock is so cheap that you can tolerate a management team that you'd rather not be invested with. We've learned the lesson too many times about how much damage a management team can do that's not focused on what's best for the shareholders. So, rather than trying to make that a question of what price would we be interested in investing with management teams that are subpar, we've made those more off limits.” Bill Nygren

"Benjamin Graham, in the Intelligent Investor, said you evaluate management twice in the decision making process. Once through face-to-face interrogation. You ask them questions and they respond and you make a judgement about the quality of their responses. In addition, the quality of management also manifests itself in the numbers: in ROE (absolute and relative to competitors), return on total capital, growth rate, industry position, trend of market share, and profit margins." Leon Cooperman

“More and more I think it is going to be important to study the paper trail of existing management. You have to understand how a manager behaves and how that manager has behaved in past situations. In general, you have to understand the history of that person’s behaviour to get an idea of what the future is going to look like.” Bruce Berkowitz

“When we evaluate a management team, we’re much more focussed on analysing past decisions and actions than simply reviewing their responses to our questions.” Lee Ainslie

“We are aware of the limitations of our insights into human nature and we therefore expect management words to be borne out by figures in the report and accounts.” Terry Smith

“I spend most of my time reading everything the company has said: How has the business done relative to what was planned? Has management consistently done what it said it was going to do?" Chris Mittleman

"I am willing to buy anything as long as management is not crooked." Leon Cooperman

“The best judgement we can make about management competence does not depend on what people say, but what the record shows.” Warren Buffett

“We look for managers who are owners, and who have always acted in the best interest of ALL shareholders. This leg is the trickiest: our experience shows us that we must follow what these managers have actually done, rather than what it is that they have said they have done. (You know, just the reverse of our parents' admonition: "do as I say, not as I do").” Chuck Akre

“There’s no excuse for cutting corners when it comes to vetting management’s track record, verifying what they say is correct, and tracking if what they do is what they say they’re going to do.” David Herro

“The way to assess management’s track record is to examine their incentives, learn how they spend their time, and perform scuttlebutt research. Notice that I did not mention listening to investor day presentations or meeting with management.” Todd Combs

“.. what you’re better off doing [than interviewing management] is sitting in a room and reading the last 10 years of what they said what happened, and then form your own conclusion of where you think the business is going to go in the future, rather than having them tell you about it.” Mohnish Pabrai

"Rather than relying on meetings with management I instead rely on deep dives into firm's accounting. If the company's business hasn't changed, and management hasn't changed, my litmus test is the numbers. Don't sell me a bill of goods; let me see what you've done." Charlie Dreifus

“We do not find it particularly helpful to talk to managements. Managements frequently want to come to Omaha and talk to me, and they usually have a variety of reasons that they say they want to talk to me, but what they’re really hoping is we get interested in their stock. That never works. You know, managements are not the best reporting parties in most cases. The figures tell us more than a management does. So we do not spend any real amount of time talking to management. When we buy a business, we look at the record to determine what the management’s like, and then we want to size them up, personally, as I said earlier, whether they will keep working.” Warren Buffett

"I typically don't meet management. I don't talk to management. I was in private equity for 15 years. And generally, if you become a CEO of a company your a really good salesman, one way or the other, and you're gonna probably spin people. I made a couple of big mistakes when I got involved in situations where I liked people too much. And, I generally like people. So, the way to avoid that is put the filter on that rely on reading transcripts, 10-Ks, 10-Qs." Ted Weschler

“I think the truth is I’ve become increasingly sceptical about the ability to judge the competence of any management team based on a relatively short-term period of business performance.” Nick Train

“Unless we are investing in a small-cap company, we find it is rarely necessary to personally interact with management. Most of the information we need to find can be gleaned from 10-Ks, proxy statements and annual reports. We also think that much can be gleaned through the analysis of managerial communications. How management communicates with its key stakeholders offers insight into their character. We like to see managers who do what they say they are going to do and are open and honest with respect to their challenges and mistakes. We have found that management teams that are candid and don’t blame others for company shortcomings tend to be better value creators over time than promotional types.” Jake Rosser

"Even if you meet with management, you may not learn something. Obviously, actions speak louder. You want to see what they have done. Everything being equal, the more you know about management, the more honest and upfront they are, the more motive they have, the better the situation is and the deeper the discount." Li Lu

"The hardest thing is to find management that actually objectively behaves in shareholders' interest as opposed to their own long-term interest. It comes down to a whole number of things - what's their governance like, when they allocate capital, how do they allocate it? It's not what they say, it's what they actually do. A lot of people tell a good story, but their behaviour belies that." Bill Miller

"You want find management that is terrific in managing the business and presumably they have demonstrated that by the time we get involved. We ask them how do you measure your success at this company, by what means? We listen to what they have to say and make our own judgment. Sometimes you get answers such as 'well if the stock price goes up'. Sometimes you find CEOs with screens on their desk watching their stock price all day long. That's not a characteristic we find particularly attractive. My quick judgment would be their eyes are on the wrong thing. We are interested in how they discuss the reinvestment of the free cash flow they are generating, how they discuss the arrangement in their balance sheet, whether they use debt capital and plan to deploy it. At the end of the day, if this business can be quantified, then I wouldn't have a job." Chuck Akre

“We feel more comfortable when a [management] team has been in place for a long time, with a good track record.” Marathon Asset Management

“One thing you need to determine is: Are the company’s leaders honest? Do they have integrity? Do they have huge turnover? Do they treat their people poorly? Does the CEO believe in running the business for the long term, or is he or she focused on the next quarter’s consensus earnings?” Lou Simpson

"The most important thing is the attitude of management toward their shareholders. I don’t think it’s very original to say you want to find managements that are candid and honest about the pluses and minuses in their business. If they’re not candid about the minuses, chances are their subordinates are not telling them what’s going on. I like managements that are not promotional or flashy, that seem to be interested in running their business and nothing else." Glenn Greenberg

"We strive to invest with management teams that will be effective stewards of our capital. This means that they are accountable, exhibit a shareholder orientation, possess a record of operation excellence, and most importantly, are effective allocators of capital." Jake Rosser

"Managements of companies possess more information about their companies than you ever will be able to possess. Pay more attention to what managements do than to what they say. Remember, managements, like most other people, tend to act in their self-interest. It often is a favorable sign when managements purchase shares of their companies for their own accounts, and vice versa. Favor managements who are highly incentivised to achieve higher prices for their shares." Ed Wachenheim

"The problem arising from lofty predictions is not just that they spread unwarranted optimism. Even more troublesome is the fact that they corrode CEO behaviour. Over the years, Charlie and I have observed many instances in which CEOs engaged in uneconomic operating manoeuvres so they could meet earnings targets they had announced. Worse still, after exhausting all that operating acrobatics would do, they sometimes played a wide variety of accounting games to 'make the numbers'. These accounting shenanigans have a way of snowballing .. These can turn fudging into fraud." Warren Buffett

“Interpreting the accounting is important in understanding the company culture and how management thinks. You typically don’t get aggressive accounting by conservative management.” Rajiv Jain

“Aggressive balance sheets and accounting are typically not associated with conservative management teams or those planting seeds for future generations. They are typically associated with borrowing from the future. Verifying and exploring this is the basis from which our qualitative analysis flows.” Todd Combs

"Managers that always promise to 'make the numbers' will at some point be tempted to make up the numbers." Warren Buffett

“Don’t trust quarterly earnings. Verify reports through the source and application statement. Figures can lie and liars can figure.” Irving Kahn

"In the long run, management stressing accounting appearance over economic substance usually achieve little of either." Warren Buffett

"Charlie and I tend to be leery of companies run by CEO's who woo investors with fancy predictions. A few of these managers will prove prophetic - but others will run out to be congenital optimists, or even charlatans. Unfortunately, it's not easy for investors to know in advance which species they are dealing with." Warren Buffett

“My general view is that if management is so focused on managing the short-term numbers, they're less likely to be as focused as they should be on the longer-term fundamentals of the company.” Rajiv Jain

“It’s a Wall Street truism that good management is important to any company’s success, but the typical analysts report ignores the subject. Analysts prefer to discuss the latest numbers, but we never buy anything without assessing the leadership.” Chris Davis

"Analysts are competent gatherers of facts and figures, but few can be relied upon for much more. Their assessments of managements are superficial and far too uncritical. I want a small group of hard workers who know their industry, who have plans for the future but can adapt to change, and who are shareholder orientated, in large part because they own a large chunk of stock themselves. We always ask around, get third-party opinions from the company's suppliers and customers and others in the same industry." Ralph Wanger

“Broker/analysts rarely comment on management in any detail and if so they tend not to criticise. For many years, when presenting the importance of management assessment work, the following quote from Warren Buffett has been used by Marathon “After ten years in the job, a CEO whose company retains earnings equal to 10% of net worth, will have been responsible for the deployment of more than 60% of all capital at work in the business”. This confirms what we have, always believed, namely that a management can make or break a company. By far the greatest failing of broker research therefore is its inability to address the most important issue at a company, namely the quality of management... Writing about a company without mentioning management is akin to Hamlet without the Prince.” Marathon Asset Management

"We never meet with management. For all the bad asymmetries of being on the short side, one of the good asymmetries is that we don't rely on the company. Those that are long the stock and are close to the company almost never hear the negative side in any detail. The biggest mistake people make is to be co-opted by management. The CFO will always have an answer for you as to why certain numbers that look odd really is normal, and why some development that looks negative is actually positive." Jim Chanos

“The real way to get a feel for a company’s strategy is through discussions with customers and competitors. Customers and competitors give you the truth. Management may or may not give you the truth.” Chuck Royce

"Management always has a big influence on your success, no matter how good or how bad the business is itself. Management is always part of the equation of making the company successful, so the quality of management always matters." Li Lu

"The longer I've been in the business, the more I think management really makes a difference. The main question is, how do you determine if it's a good management? The interview is not sufficient; it's only a first step. Interesting though, studying the past record of that management more often than not is a pretty good indicator of what the future will be." Preston Athey

"I try to know as much as I can about the nature of management." Mohnish Pabrai

"I love focused management. The management of — if you read the Coca-Cola annual report, you will not get the idea that Roberto Goizueta is thinking about a whole lot of things other than Coca-Cola. And I have seen that work time after time. And when they lose that focus — as, actually, did Coke and Gillette both, at one point 20 to 30 years ago somewhat — it shows up. I mean, it — two great organizations were not hitting their potential 20 years ago. And then they became refocused. And what a difference it makes. It makes tens of billions of dollars’ worth of difference, in terms of market value." Warren Buffett

"I think you judge management by two yardsticks. One is how well they run the business and I think you can learn a lot about that by reading about both what they’ve accomplished and what their competitors have accomplished, and seeing how they have allocated capital over time. And then the second thing you want to figure out is how well that they treat their owners. And I think you can get a handle on that, oftentimes. A lot of times you can’t. It’s interesting how often the ones that, in my view, are the poor managers also turn out to be the ones that really don’t think that much about the shareholders, too. The two often go hand in hand... the conclusions I’ve come to about managers have really come about the same way you can make yours. I mean they come about by reading reports rather than any intimate personal knowledge or — and knowing them personally at all. So it — you know, read the proxy statements, see what they think of — see how they treat themselves versus how they treat the shareholders, look at what they have accomplished, considering what the hand was that they were dealt when they took over compared to what is going on in the industry." Warren Buffett

"I’ve been fooled many times by being too impressed by executives who are articulate and have done well in the past. I’ve learned to be humble about my own opinions and rely more on the opinions of people who aren’t biased and have known the management personally or professionally for a long time." Ed Wachenheim

"Given the availability of so much information on the internet, I'm not so interested in meeting management today. You can get seduced too easily. I'm more interested in finding out how a person has behaved in the past. If I can listen to a few of the CEO's speeches and read the transcripts or earnings calls, that is more important than talking to him. A smart, dishonest person can fool you, especially when he's talking about his own business." Bruce Berkowitz

"Make no mistake about it: a management's acumen, foresight, integrity, and motivation all make a huge difference in shareholder returns." Seth Klarman

"Leadership is everything – it’s fascinating how differently the same business can perform with two different leaders." Jeffrey Ubben

"Making sure you have the right management team that's making the decisions everyday that causes the value to compound over time is the most important thing to me." Thomas Gayner

"The main job of the CEO is to protect the culture. This comes down to integrity or more broadly speaking "setting the right example." Robert Vinall

"Our second key principle is to invest in management teams with equal measures of talent and integrity, because one without the other is worthless. The talent part largely speaks for itself through an objective look at performance, especially over time. Integrity is a bit harder to judge, but it’s one of those things that you know when you see. Think about how you decided whom you were going to marry. You spent lots of time together. You met her family. You met her friends. You learned what she cared about and her basic value structure. We do the same types of things to get to know management of the companies we invest in. It’s imperfect, but to our way of thinking nothing is more important." Thomas Gayner

"I realized that in order to be serious in this business, you need to raise your research skills to a high enough level to assess management teams and whether your investment mosaic is accurate." Marc Cohodes

"If a management makes bad decisions in order to hit short-term earnings targets, and consequently gets behind the eight-ball in terms of costs, customer satisfaction or brand strength, no amount of subsequent brilliance will overcome the damage that has been inflicted." Warren Buffett

"We spend an inordinate amount of time trying to understand the quality, ability, and motivation of a management team. Sometimes we get very excited about a business with an attractive valuation only to discover that the company has a weak management team with a history of making poor strategic decisions or that is more concerned about building an empire than about delivering returns. We have made the mistake more than once of not investing in a company with a great management team because of valuation concerns—only to look back a year later and realize we missed an opportunity because the management team made intelligent, strategic decisions that had a significant impact." Lee Ainslie

"A lot of times when people say someone is a great manager, what they really mean is that the company has done well – in other words, it has a great stock chart. It can be awfully difficult to figure out what caused the good results, the CEO or the general industry conditions. Most of the time a great CEO cannot outrun a lousy business or a tough climate. So while I agree that management matters, you have to be careful that widely acknowledged “great management” doesn’t turn out to simply be a momentum indicator." Adam Weiss

"And ideally and we've done a lot of this you get into a great business which also has a great manager because management matters. For example, it's made a great difference to General Electric that Jack Welch came instead of the guy who took over Westinghouse - a very great difference. So management matters too." Charlie Munger

"One of the questions I always like to ask a CEO when I’m thinking of us making an investment is, “You’re here today, where do you want to be five years from now?” Then I want to know 10 years. And the body language is great. Most of the time they’re thinking about what’s going to happen next quarter. But we really do think in those long-term increments." Henry Kravis

"One of my favourite questions in talking to any top business executive for the first time is what he considers to be the most important long-range problem facing his company." Phil Fisher

"Before meeting with top management, I determine the three questions I would ask if I could administer truth serum. I see a lot of analysts who arrive with five pages of questions, and that’s not very helpful. You want to identify the key questions that are going to drive the investment, and ask the CEO." Glenn Greenberg

"I don't think you can spend too much effort trying to understand the quality of management – at the end of the day, it's the most important investment criterion. I've learned over time that great management teams deliver positive surprises and bad ones deliver negative surprises." Lee Ainslie

"Graham and Dodd didn't place the quality of management as high as they might have. Good managements add value, they have lots of levers they can pull, they can buy back stock when it's under-valued, they can use the stock as currency when its over-valued. Bad managements will think only of themselves first. Those are early lessons, but they are profound lessons that I learned, and I learned them well." Seth Klarman

"If a company's balance sheet passes muster, I then try to get a handle on management. The competence, motivation, and character of management often are critical to the success or failure of a company. To form an opinion on management, I normally pay careful attention to the management's general reputation, read what the management has said in the past, assess whether the managements stated strategies and goals make sense, and analyze whether the management has been successful carrying out its strategies and meeting its goals. However, I am humble about my abilities to accurately assess managements. Experience shows that investors can be unduly impressed by executives who are charismatic or who purposely say what investors want to hear - who play to their audience." Ed Wachenheim

"I also like to see whether management owns enough of the company's stock to serve in its best interests. But you often have to keep track of management's actions digging into the footnotes of financial statements to see if they are honest people. When I buy a stock, I never visit or talk to management because I think that a company's financial figures are good enough to tell the story. Besides, management always says something good about the company, which may affect my judgment. I know a lot of good investors who like to talk to management and visit companies, but that's not me. I don't like that kind of stress, and if I had had to run around visiting so many companies, I would have been dead after a few years." Walter Schloss

“I would love to own businesses in which management have large stakes. That’s one of the checklist questions. Does management have a large stake? Well, are you always going to exclude a business in which management doesn’t have a large stake? No, you’re not going to exclude a business just for that reason, if everything else is fine. But for any portfolio, you want to make sure that all your businesses are not in business in which management has very low stakes because you kind of get stuck investing in one particular manner.” Mohnish Pabrai

“We have a bias to liking companies where the management owns a lot of stock and has created value. The idea is fairly simple, people who have created value have a way of figuring out what will do more of it in the future. If you have a management team whose primary economics are coming through salary and bonus you can be at odds versus being a shareholder.” David Abrams

"I want to invest with people who have at-risk skin in the game, ideally founder capital. I like knowing that I and the person calling the shots are in parity in terms of risk." Frank Martin

“The fund is overwhelmingly (over eighty-five percent) invested in firms run by their founders or first generation management. Just as interesting is that I did not plan for this! We have ended up with a portfolio of owner-managed businesses as a by-product of our assessment of the quality of the people involved. In other words, these managers earned their way into the portfolio.” Nick Sleep

“I follow the philosophy, have your money where the owners are.” Mario Gabelli

“Nomad’s investments may be in publicly listed firms but these firms are also overwhelmingly run by proprietors who think and behave as if they ran private firms.” Nick Sleep

"Another important criteria for me is that I always want to see management own a significant amount of stock." Phil Carret

"We are most attracted to companies that are led by strong management teams with a proven track record of success, who have a significant personal financial stake in the company." Chris Mittleman

"Families are better able to withstand short-term profit fluctuations and to invest for the long-term benefit of themselves and outside shareholders." Marathon Asset Management

"I invest almost exclusively in companies with active and engaged owners. Very occasionally, you find managers who think and act like owners even if no owner is present but this is the exception rather than the rule. If a restaurant has an absentee owner, over time the service quality will slip and the waiters will have their hand in the till. With large companies, it is no different. For this reason, a central tenet of our research process is understanding the owner - how he or she thinks and whether his/her interests are aligned. I increasingly think that of the three criteria I apply to investment decisions, management quality is the single most important one. I would never knowingly invest in a company where I thought the management lacked integrity." Robert Vinall

"A CEO faced with 4 years at the helm with financial incentives is unlikely to act in the same way as an owner-manager with a multi-generational timescale." Marathon Asset Management

"All else being equal, favour companies in which management has a significant personal investment over companies run by people that benefit only from their salaries." Peter Lynch

"We also like to see firms where management has cultivated an ownership culture. Hallmarks of an ownership culture include management teams with a significant portion of their net worth tied up in the company they manage and a disciplined focus on profitable growth." Jake Rosser

"We love owner-operators. We like to have proper alignment with our boards and with our managements. And we pay close attention to incentives. We think they're critical to getting good performance all the way up and down the organization. We pay attention to what they do much more so than to what they say." Mason Hawkins

"We want to invest with management teams 'that think and act like owners.’" David Herro

"We usually tend to be in bed with managements who don't really need the capital markets." Marty Whitman

"The legendary investor Philip Fisher passed away in 2004. I had the chance to talk to him two times on the telephone and to meet him briefly in San Francisco, many years ago. Over our conversations, I asked him many questions and at some point, he summarized his approach in these words : “You know, Wall Street focuses on lots of unimportant things. But the quality of the management makes up 90 to 120% of the success of a business. Investors think with such a short term horizon but in the end, management is the key factor”. I never forgot this advice." Francois Rochon

“When we buy a business, we’re looking at a management that’s been there for a long time, we can see their performance, we can see how they behaved in difficult situations, we can see how they treated their customers and employers and we can get a really good read on them.” Warren Buffett

“Our opinion of a management team rarely remains unchanged after our ownership - it either gets progressively better or worse. Over the long term, the character and quality of a management team will have a major impact on the success of our investment in its company, and this is particularly true among seemingly similar companies in the same industry.” Li Lu

“To do exceptionally well on an after-tax basis (i.e. in a single company over an extended period), management increasingly becomes the driving variable in a function that is a product of price, quality, management, and time. They forcefully skew the distribution of long-run outcomes. That’s why I try to stuff our portfolio with management teams that “get it.” Founders run 45% of our companies; the average tenure of management is fifteen years.” Ryan Krafft

"Buffett has a near 100% track record in picking managers which tells me it must be possible to pick good managers. We tend to overestimate our ability to forecast financials and underestimate the role of people and our ability to spot them. When the new CEO took the reins at Berkshire Hathaway it was not the economics of the textile industry that determined the outcome. In many of the investments I can think of it was the people that were crucial and I would suggest we should be a little bit more sceptical about our ability to build excel models and valuations and calculate margins of safety and this type of quantitative stuff and give ourselves a little more credit on our ability to think about people." Robert Vinall

“Leadership matters. Some CEOs are more talented than others. The management of companies is not unlike compound interest, where small differentials in rates of return eventually yield vastly disparate outcomes. The gap between what a capable executive team and an incompetent one achieve might be barely discernible in the short term, but in the long run talented managers soar, average ones muddle along, and the worst drive their companies off the cliff.” David Abrams

“Betting on the management teams that have a similar view of the underlying dynamics that we have, and also looking at their record of capital allocation and returns on capital, that’s really the marginal odds we’re betting on. We’re effectively building a business based on the fact we’re more right than wrong and betting on the people that agree with us.” Andreas Halvorsen

"If the CEO owns $1 million worth of stock and gets paid $10 million per year, it’s pretty clear he’ll value his job more than the value of the stock. If he’s paid $1 million per year and owns $50 million in stock, we think that’s predictive of his making better long-term decisions for the company... Where the founder owns 20-30% of the business... they’ll work with Wall Street because they don’t completely control the company, but at the same time they can take a longer-term perspective. CEOs with tons of options rather than actual shares can be prone to adopt Wall Street’s short-term focus, which can cause value to be eroded more quickly than you’d think as one bad decision piles on top of another." Adam Weiss

"The public company CEO and board members generally are bond holders. They are thinking about their salary and board fees as coupons. We messed it up even more by moving from options to restricted shares so you basically get paid if you're the CEO for driving into work. There is no equity guy in that room. The guy that says let's cut our R&D, let's bet on five projects instead of fifteen, lets try go three for five instead of three from fifteen. And that's risky, you're making choices and choices are risk. The public markets conspire to generate mediocre performance, because mediocre has a coupon attached to it. Our job is to make everybody uncomfortable and be the equity in the room." Jeffrey Ubben

“Beyond track records, I think you can gain understanding by probing shareholder communication and asking some basic questions: is management promotional and aggressive, are they overly focused on short term guidance, is management candid and realistic, how does management think about the business; are they rational long-term thinkers, do they use sound metrics to measure results, is the accounting aggressive or conservative, what’s management’s attitude toward debt, and are incentives and compensation sensible… I’m turned off when shareholder communication is laced with jargon, clutter, and clichés that make me feel like someone is blowing smoke in my eyes.” Allan Mecham

"I also know that good management is not a science. I have a master's degree in industrial management from MIT, that monument of science, and I can tell you that management definitely does not qualify as one of the scientific disciplines. What it relies on, when good, is a knowledge of psychology (not an exact science either), common sense, and an equable disposition. The good manager is able to get other people to work in the same direction that he or she is and makes sure that direction is a sensible one. Changing the direction of a company takes really good management." Ralph Wanger

"I always have emphasised on the quality of management. But I have come to learn that it is even more important than what I previously thought. I would go as far as to say that buying a stock is to become partner with the top management of the company." Francois Rochon

"Investors should pay more for a business that is lodged in the hands of a manager with demonstrated pro-shareholder leanings than for one in the hands of a self-interested manager marching to a different drummer." Warren Buffett

“Investors should be sensitive to the attitude of top management toward the rank and file employees. Some management have little feelings of responsibility or interest for their ordinary workers. E.g. companies where workers are readily hired or dismissed in large masses, dependent on slight changes in a company’s sales outlook or profit picture. No feeling of responsibility exists for the hardships this can cause to the families affected. Nothing is done to make ordinary employees feel they are wanted, needed, and part of the business picture. Nothing is done to build up the dignity of the individual worker. Management with such attitude don’t provide the best background for desirable investment.” Phil Fisher

"There are lots of things good managers can to do increase the value of a company. Most importantly, management give life to a company's culture, allocate capital productively, decentralise decision making to the lowest possible point, create alignment between employees and customers and suppliers and give people permission to make mistakes which is super important if you want an innovative culture." Robert Vinall

"We ask the following questions in evaluating management: Does management have a substantial stake in the stock of the company? Is management straightforward in dealings with the owners? Is management willing to divest unprofitable operations? Does management use excess cash to repurchase shares? The last may be the most important. Managers who run a profitable business often use excess cash to expand into less profitable endeavours. Repurchase of shares is in many cases a much more advantageous use of surplus resources." Lou Simpson

"When an industry’s underlying economics are crumbling, talented management may slow the rate of decline. Eventually, though, eroding fundamentals will overwhelm managerial brilliance. (As a wise friend told me long ago, ‘If you want to get a reputation as a good businessman, be sure to get into a good business.’)" Warren Buffett

“When you choose to invest with us on behalf of your clients, you’re subcontracting their capital to us to look after. The reality of this process is we subcontract it to the management of companies. Therefore, seeing they think what we regard as sensible about things is a very important sign.” Terry Smith

"When we align ourselves with superior management teams with proven track records who are passionate and able to create superior new businesses, good things tend to happen to our portfolio.” Li Lu

“I have a former colleague who likes to say, “It’s always the humans!” And that turns out to be the answer. It’s management that matters most. No matter how much work an investor puts into an idea, the future remains unknowable. In a capitalist economy, creative destruction is always happening. The best insurance against creative destruction is to partner with management teams that do the creating. That is, smart, energetic, honest people who are acting in accordance with a vision, and who have their own financial futures at stake. Over time, great people generate the best results in pretty much every undertaking.” David Poppe

“Longevity of management is usually a characteristic that goes with a successful long-term investment and frequent change is usually reflected in a lack of continuity and/or more deep seated problems.” Marathon Asset Management

“Our judgement and the judgement of most of the people who’ve studied past returns is that a considerable part of the task of being able to, not so much identify, but stick with great companies and their outsized returns, is a matter of judgement of management.” James Anderson

“When you're investing in a business for 10 years, the only things that don't really change are the management teams and the cultures that they've built. So, the question is, where do you find the best management teams and where do you find like the most innovative cultures?” Fred Liu

"If there's one thing I've learned it's that the people at the top are awfully important. The combination of a good business and people running it in the shareholders' interest can be explosive." Lou Simpson

“I’m at a stage in my career where I’d say human behaviour is the most important determinant of a business’s long-term success. I don’t care how smart an analyst you are; you can’t really know what’s going on inside a business. We want to invest not only in highly capable managers but also in those with clear records of integrity and acting in shareholders’ best interests. I’ve found that when a manager puts his hands in shareholders’ pockets once, he’s much more likely to do so again.” Charles Akre