Management Turnover as Change Agent

Wednesday, November 12, 2008

Words of Wisdom from Controversial Hedge Fund Activist

The had a very informative piece today examining Philip Goldstein, the controversial head of hedge fund Bulldog Investors.  Goldstein was the keynote interview at the Deal’s M&A Outlook Conference 2009.  According to the piece by George White,

When speaking about the many failures of major financial companies, Goldstein had harsh words for boards of directors.   

“Instead of blaming the board of directors, [the SEC] blames the shorts. It’s an artificial imposition on the free market,” he said. “Why is the board of AIG still there? They’re basically destroying the company. These boards have laws that basically protect them no matter how badly they screw up. 

”Boards can destroy billions of dollars in value and walk away. Bear Stearns, Washington Mutual, it goes on and on. The real moral hazard is on the boards. These guys get all the upside and none of the downside,” Goldstein observed.”They want to run things when things are good, but when things are bad they’re gone.”

Goldstein appears to hit the nail on the head in his assessment of boards.  Shorting stocks is not the bogey man it has been made out to be.  Let’s start seeing boards live up to their responsibilities.  If they do, we can expect some real changes for the positive. 

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