"Commentary"-Wealth Workshop
Thursday, September 14, 2006SUSIE GHARIB: Tonight`s commentator has some thoughts on wealth and how to create it. Here`s Tom Stewart, editor of the "Harvard Business Review."
TOM STEWART, EDITOR, HARVARD BUSINESS REVIEW: The worst-paid CEO on the "Fortune" 500 is the second richest man in America. Warren Buffett`s career is testimony not only to his investment genius, but to his understanding of the difference between two different versions of capitalism. The first is like the strip miner. I come in, take what I want and leave. The leftover mess, that`s your problem.
The second version is like farming. I break the sod, till the soil, grow deep roots in the community, and reap the profitable harvest. Buffett, the man from Omaha, is a capitalist farmer. His salary is just $100,000 a year. He receives no stock options; he`s frugal to the bone. When he finally decided Berkshire-Hathaway needed a corporate jet, he named it "The Indefensible." These are tough days for farmer-capitalists. We live in an era of overstuffed pay packages, egregious perks, backdated stock options, and the stink of pre-merger insider trading. To hear some people talk the phrase shareholder value means screwing your customers, communities and employees.
That`s not how it should be says Al Rappaport of the Kellogg school at Northwestern University. According to Rappaport, value creation is a discipline. The first three principles: don`t manage earnings; make strategic decisions that maximize long-term value, even if it lowers short-term earnings; and do the same with acquisitions. Wealth is a good thing as long as you`re growing it, not strip mining it. I`m Tom Stewart.
