
Why GE’s Jeff Immelt Lost His Job: Disruption and Activist Investors - etblg
https://hbr.org/2017/10/why-ges-jeff-immelt-lost-his-job-disruption-and-activist-investors
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gumby
These kind of "activist investors" are simply asset strippers. Amazing they
could get a foothold in a blue chip giant like GE.

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valuearb
They got a “foothold” because they are owners, who own more stock than all of
management and the board put together. The amazing part is it took 20 years
for an activist to get a seat.

“During Immelt’s tenure, GE’s stock market value fell by about half. Its stock
is trading where it was 20 years ago.“

This is a testament to the amazing power of entrenched management.

The author is just butthurt because a CEO who helped espouse his personal lean
management mantra got canned as incompetent. His complaint that the activists
will gut innovation at GE is ludicrous, given GE hasn’t successfully innovated
in over twenty years.

Activist investors are investors. Gutting a good business for parts to make a
short term profit at the expense of long term value isn’t good investing. But
recognizing the stage a business is in, and managements ability to fix it is
important into fdetermining the best possible future for it.

Warren Buffett once let himself get talked into letting management of one of
his investments to invest cash flow back into its tough business and ended up
regretting it greatly. Since he finally made the decision to shut down
Berkshire Hathaway’s textile business and strip its remaining assets and cash
flow to invest in far better companies, BRK.A stock price has increased a bit,
from around $10/share to $200,000/share.

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gumby
> Activist investors are investors. Gutting a good business for parts to make
> a short term profit at the expense of long term value isn’t good investing.

Yes, tautologically activist investors are investors and indeed, a system that
prevented the business owners from managing the business would be a bad idea,
regardless of what you think of their decisions.

But, though short-termism is typically bad _for the company_ it has been good
for some entities, like Carl Icahn, Bain Capital et al. I wouldn't call it
good for the economy. Buffet is a buy and hold.

Whether Imelt was investing in the future or squandering it is a judgement
call. The markets certainly showed _their judgement_

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gozur88
>But, though short-termism is typically bad for the company it has been good
for some entities, like Carl Icahn, Bain Capital et al. I wouldn't call it
good for the economy. Buffet is a buy and hold.

Buffett is buy and hold _as long as he retains confidence in the management
team_. He's certainly not afraid to sell.

Entrenched, complacent management is as much a danger to a company's value as
"asset strippers". Surely the fact that the company's valuation has dropped so
precipitously is a good reason to fire any CEO, particularly when the rest of
the market is up so much over the same period.

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valuearb
Buffett's got a famous bit of advice that you want to own businesses any fool
can run, because sooner or later a fool will be running it. But that aside,
he's certainly not going to ride an investment down if the CEO is damaging
value and Buffett is unable to remove them.

