Jennifer Openshaw
OK, I'll admit it. I'm a stickler for spending money wisely. I want to know what I'm getting, and I don't tolerate a lot of fluff.
Now, as a Millionaire Zone investor, I think it's important that the businesses I invest in take the same approach to spending money. Careful, well-positioned spending means efficient use of resources, but signifies good management, too. So when I see companies throwing money away on huge executive salaries, perks and lavish facilities, I start to wonder. Without wasting words, here are five signs of money being wasted in corporate America:- High "standard of living." Most of you in the corporate world have seen this, either in your own enterprise or others you work with: lavish lifestyles including fancy office buildings in expensive places, company jets and a "do it and don't worry about it" attitude about travel and travel expenses. Judging standard of living can be tough. As an investor, I look for companies that spend money the way I would spend my own personal funds -- modest infrastructure, locations, salaries and costs. One person travels to a meeting, not five. No lavish retirement packages or golden parachutes. The poster child, of course, is Warren Buffett's Berkshire Hathaway (BRKA Quote - Cramer on BRKA - Stock Picks). Berkshire may be a little over-the-top in the "plain Jane" department, but it does send a good message.
- Share buybacks for naught. Announcing share buybacks has been in vogue recently. Companies want to reward shareholders and create positive headlines, so they buy back shares. In theory, company cash is used to increase shareholder value for the remaining shareholders. That's nice, and it's better than a poke in the eye with a sharp stick. But if my company is going to spend billions buying back shares, I want to see the number of shares outstanding actually drop. Sometimes it does; sometimes it doesn't. The company might be granting just as many options on the backside as it is buying back. Check the "sale/purchase of stock" in the statement of cash flows. If positive, the company is reissuing at least some of the buyback, and if option grants are excessive, watch out.
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