as buffet opines...., page-3

Alnby,

I know its a bit sad, but I am somewhat partial to engaging company management from time to time, almost exclusively on matters of shareholder value creation (or destruction, as the case may be), or on governance issues.

Invariably, that engagement takes the form of written correspondence, always couched in constructive criticism and/or commentary. Importantly,

I always seek to argue or make my position known in a factual, emotionally-detached manner, making as much use of precedence, benchmarking or other quantitative bases.

My experience is that company executives are favourably responsive if they have a sense is that you are "adding value" or making a positive contribution to the matter(s) at hand, as opposed to mere hysterical ranting.

Certain aspects of the job of CEOs/MDs of publicly-listed companies - especially small ones, I have observed - tend to be somewhat isolated and lonely in a sense.

This, I find, applies especially to the exchanging of expectations with capital markets...surprisinngly and counterintuitively, most CEO's have very little training in, or understanding of, what it is that investment markets look for, and over what timeframes.

I think CEOs are often only too happy to receive clues, hints or feedback from market participants, provided that feedback is considered, insightful and adds some value.

In COF's case, my interaction with management started almost two years ago, at that favourite battle ground of crusty old retail investors, the Annual General Meeting.

On this particular occasion I was particularly vocal in supporting my reasons for voting against the re-election of certain directors, whom I was arguing had been negligent and deficient in their duties in preventing the destruction of shareholder value by presiding over, and sanctioning, a series of poorly-considered acquisitions.

That public exhortation of fellow shareholders attending the AGM to vote accordingly was followed up by a lengthy missive of concern from me to the company chairman.

The report included what I thought was a pretty sophisitcated and professional benchmarking exercise revealing unambiguosuly how COF had under-performed relative to a group of comparator companies in the 5 years to 2010 based on a range of operational and financial metrics.

I also took the liberty of distributing the same report to the Australian Shareholders Association, as well to the Chief Investment Officers of COF's main institutional investors at the time.

Soon after, I was priviliged to have been invited to a meeting with the chairman, wherein I discerned a genuine sympatico for the reservations that I was raising.

After the absolute disaster for the company of the late 2000s, I gained the clear sense that the new chairman saw himself as having a clean slate and, to his credit, I sensed he was canvassing as wide a range of views and opinions on the go-forward strategy for the company, including from little old me. Which I still to this day think is a statement in itself.

Subsequently, the current MD was appointed and six months after he had started I had occasion to be introduced to him at some or other Institute of Mining and Metallurgy function. We chatted for about 30 minutes and I made him aware that I was a small shareholder in the company. He had nothing overly definitive to say about the business turnaround, but in that short time I found him to be modest and direct, with a clear grasp of the mistakes that had been made.

Then, in late 2011 I listened to him present at an investor conference.

In addition to that, I always listen intently to webcasts of the company's results (often twice to make sure I haven't misinterpreted anything).

[During the webcast presentation of COF's latest financial results, I detected the tone and the body language of John Douglas and Urs Meyerhans to be particularly relaxed and confident.]

So, that's the extent of my interaction with management.

I hope I haven't over-represented myself: I am not house friends with the chairman or the MD or the CFO. Nor do I take lunch with them regularly.

I simply try to listen very closely to what maangment says, I take copious notes, and then every six or whenever the company provides an update or a financial result, I compare my notes to the actual outcomes.

So far, managment hasn't skipped a beat once.

(Oh, and the directors with whom I had a negative bearing at the AGM, have subsequently resigned from their positions...not for a minute do I think that this was due to my agitating; I suspect it was simply something that reached its inevitable conclusion)