Or should they act as responsible corporate citizens of the communities in which they operate, even at the cost of profits or other goals?
Consultant Peter Drucker observed that the ultimate responsibility of company directors is not to do harm.
Not to do harm?
Volkswagen put profit ahead of the environment, a huge story yet to unfold.
Mutual fund First Eagle Investment Management USA was fined nearly $40 million for illegally using their investors’ money to pay for marketing and distribution.
Deutsche Bank was recently fined a record $2.5 billion over interest rate rigging.
Nearly every company and corporation around the world borrow money. You can lend them some of your hard earned savings in return for an interest rate that is usually 1% to 2% better than a bank deposit might pay.
Larger corporations can afford an army of lawyers, and we have seen some bond offer documents (with clever little clauses) carefully tilted in favour of the borrower. Strange as usually the lender calls all the shots, but that does not stop the more avaricious corporates from “trying it on”.
How can investors tell the difference?
Clearly investors need to distinguish between those corporations are who ruthlessly profit driven, and those that who seem to take pride in what they offer, and how it might benefit their investors.
Not an easy task?
Without doubt there is good, greedy, and doubtful in financial companies and corporations, large and small, and investors just must do their due diligence. They just must.
Tip No 12 - what is the background of the company? What were they “born” out of? Do you feel comfortable dealing with this sort of organisation?
We like the Dimensional Funds (DFA) that were founded (born out of) by university researchers.
A July 2015 report from Morningstar (a global research company);
- gave DFA an “A” for its corporate culture
- said DFA has a consistent industry leading focus on its investors
DFA enjoys very strong fund management staff retention at over 90% since 2009, whereas in NZ it is common to see fund managers moving on every 4 to 5 years.
Tip No 13 - if your gut feeling says “not sure”, listen to it. If in doubt, don’t.
Or at the very least use the old adage, “if in doubt, do half”.
Tip no 14 - look past the charming person or presenter – way past. What matters are the values of the organisation behind them?
We have all been in the offices of the big corporates, and yes, some of their staff are very charming, and many of them are honest too. However it is the unseen people upstairs who set the policies that may be profit driven, and maybe not in your best interests.
Tip No 15 – don’t be cynical, but enquire, enquire, enquire. Look on Google at the company and also at their partners. E.g. Deutsche Bank have NZ links.
Being cynical will take none of us anywhere, but being of an enquiring mind never does any harm.
Tip No 16 - there is never any hurry to invest. Do your due diligence first.
If someone is telling you it’s a hot opportunity and you must hurry, yes, do so. Hurry out the door and away somewhere else. Hot offers and opportunities are the words often used by the less-than-honest who are out to make a quick commission from you, and then onto their next victim.
There are few hot offers in investment markets that cannot wait for you to think it over for at least 72 hours (preferably 3 sleeps). Ask your mind to think it over, and without rose coloured glasses too. I find my subconscious brain does good work, if I allow it to do so for a few days.
Tip No 17 – seek out and only invest with principled companies and corporates, it will pay off in spades.
Supplied by Alan Clarke, financial & retirement adviser, & author.
His 2nd book “The Great NZ Work, Money & Retirement Puzzle” is now available.
Alan is an independent authorised financial adviser (AFA) FSP26532.
His disclosure statement is available on request and free of charge.