“Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.” -Warren Buffett
.. was down €367 million on a single investment. Losing that much money was bad; having to include it in the bank’s yearend report to the public, as required by Italian law, was arguably much worse.
For one half of the deal, Paschi would make a sure-thing, moneymaking bet with Deutsche Bank and use those winnings to extinguish its 2008 trading losses. Of course, Deutsche doesn’t give away money for free, so for the second half of the deal, the Italians would make a bet that was sure to lose.
Here is the 2008 Financial Report of Paschi (link)
If criminal energy is involved and the Management tries to betray the shareholders (or at least don’t present them the thought) it is really hard to discover this timely – I would say for a non institutional investor it is virtually impossible. My conclusion from this is: It needs an honest management whom you can trust for me to own the stock, in best case with skin in the game – otherwise buy an index-funds.
How to do this
It is not easy to evaluate the caracteristics of people – especially from a distance. This would be the creterias that I like to see in a managemnt team:
- never was involved in sleazy actions (especially against shareholders)
- humble appearance like at InvestorAB or Warren Buffett (the opposite of show-offs)
- reasonable capital allocation (did they buy in 2009?)
- communicate misstakes (early), assume responsibility (don’t blame the weahter)
- owner owned (is not neccesary but adds some safety)
- no exessive salary (1-$ managements ?)