Gaap vs Adjusted Earnings

BGM,
Great question. Due diligence on management is often very difficult to perform and I can’t say I always do nearly as good a job as I would hope. But, there are some resources. Glassdoor is usually worth looking at. Also, just the press. When you have employees demonstrating across the nation due to low wages and poor working conditions, that’s more than a clue.

But, best be careful with what gets reported. A while ago there was an expose on Starbucks (a company I thought did right by their employees). The reports had to do with how the scheduling was making the employee’s lives difficult to plan and I think there was some other problems as well. Turned out, first, it was pretty much a local problem, isolated to a few stores with sort of inconsiderate local management. But even more important, it got corporate attention. I don’t if it was Schultz, but the response was, oh yeah, we see this can be a problem, we’ll provide some corporate guidelines on scheduling to help local store managers make better decisions. This was a great response IMO. They didn’t take away local authority. Wise enough to know that local conditions might require inconvenient schedules at times, but also provides guidance for how to best manage under “normal” condition.

Also, not too long ago there was an expose about work conditions at an Amazon warehouse (I don’t remember the location - somewhere in PA I think). I’m long Amazon. As a concerned stockholder I wrote to investor relations. I got back one of those non-answer answers. I was informed about how good Amazon was statistically with respect OSHA filings and how they were below the national average for safety and health problems and blah, blah, blah. But nothing that directly related to the issues raised in the article (I don’t recall the publication). I live in the Seattle area, home of both Starbucks and Amazon. I’m long both. Long Costco and Microsoft as well, other Seattle based companies. I have friends who have worked at Amazon and Microsoft. They all seemed to think that they were good companies to work for, but now we’ve got new leadership at MSFT so the jury is out there. Nadella started out his tenure with a major re-org and laying off a lot of people more or less indiscriminately. Not good in my book, but I’ve not sold either. He came into a difficult situation. Mulally instigated a huge RIF at Boeing Commercial right after 9/11 because he had the foresight to see what that was going to do to airplane sales. He was right, the business tanked for a while. I consider Alan one of the best managers ever.

How far down the ladder do I look? Not far, I look mainly at the executive suite and primarily at the CEO. That’s the guy who sets the tone for corporate culture. If he’s a jerk, you can be pretty confident that jerkiness will pervade the management ranks. However, the converse is not completely true. No matter how much integrity you’ve got at the top of a large organization, you will inevitably find jerks in the ranks. Starbucks has something like 21,000 stores with a manager at each one. There’s bound to be some a**holes in the mix.

I know this post is kind of long, but short on actual answers. I wish there were really good, reliable resources for this, but there are none that I am aware of. I can’t always make an evaluation of good management. It’s usually easier to evaluate bad management because it tends to get press coverage.

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