Leader 20.10.2017 – Honesty in business – when CEO’s have no investment in their own companies and take on other work!

Just imagine what it is like to run a big company like Apple or Tesla. Steve Jobs and Elon Musk are on the job 24/7. They work long hours and are totally committed to their companies’ products, staff, customers, and other shareholders.

Note the words “other shareholders” – the CEO’s are almost always a shareholder with others – and also note the words “24/7” – these CEO’s work long days, even sacrificing family life and leisure.

To be successful in today’s global world you need strong management skills, you need to be a shareholder, or as the media says “have skin in the company”. This means that you are totally committed and have little time left over for family or leisure.

But look what has been going on here in Finland in the pension companies:

  1. The 3 largest have CEO’s who have absolutely no ownership in the companies – they are not even real companies – they are cooperative companies of sorts, owned by their members, who are the companies that have their pensions managed by the pension companies.
  2. These CEO’s have lots of board positions in other companies, and one of them is chairman of the Finnish Olympic’s organisation which has absolutely nothing to do with pensions.
  3. The pension companies have an investment activity which is highly regulated, and basically they all have similar organisations and investment activities carefully regulated by dozens of civil servants who are often too close to the pension companies for comfort.
  4. The companies are not fully transparent with regards to diversity, costs, and their investment strategies.
  5. They justify their investment strategies by circular arguments – they mimic one another in asset allocation based on advice from the same consultants and the same investment managers who all say with one voice that “the investments are secure and profitable” because that is required by law.
  6. It would be interesting to see why regulators think that these investments are safe, secure and profitable – why do the companies have similar asset allocations, what are their costs in relation to similar institutional investors overseas, what is their performance compared to these investors?
  7. Who has ordained that they have so much in real estate investments, why do they lend money to their members, why do they buy bonds with almost no real returns?
  8. That they have similar investments and annual results shows that they rely on one another for defining what is “safe and profitable”. Given that large parts of their investment portfolios are based on investments in the real estate of the companies whose pensions they manage, and that they invest in the shares and debt of these same companies also shakes their unfounded confidence in the righteousness of their activities.

The answers to these questions are always met with silence or with references to the regulations – as if the regulations incorporate brilliant investment gems, which is an absurd thought.

In closing, I come back to the above questions – how is it that highly paid pension bosses, who have no “skin” in their main business, have the time and resources to work elsewhere in boards of other companies and in big sporting organisation? Work that must also make extraordinary demands on time…

It seems strange that their “heavy work load” in the pension companies appears to allow them to have time for so many extra and demanding activities; and this suggests that something is very wrong with the way that the Finnish pension system is organised.

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