Other companies limited my access to senior executives. An analyst without access to executives—and the one-on-one insights that investors often pay for—can be perceived to be at a disadvantage compared to his or her peers. Goldman Sachs was fairly up front about it, a rarity in the industry. I had recently initiated coverage on the firm, so I had few established relationships I could leverage. When I told one point of contact at the company that I'd like to have more meetings with management, he told me that the firm wasn't singling me out—they treated everyone that way. When I pushed a little harder for a meeting, I received a message that we needed to "have a conversation."What is obvious is that there is no simple solution to these agency problems, as long as there is excessive concentration of financial power in financial markets. Regulation and central banks have typically reinforced concentration. I always believed that financial markets needed regulatory frameworks that promote above all competition, regional and political decentralization, and smaller scales, but since Alexander Hamilton (or maybe the Medici?) the world has taken the opposite direction. And nothing that has been done by current governments has changed this trend.
Feeling like a student being reprimanded by a teacher, I was told that the most efficient use of management's time was for the executives to generate money for the firm instead of talking to the 20 or so analysts covering the company. An analyst like me would simply have to be patient. While I could live with this—to a degree—the gatekeeper added one more point: A consideration in granting analysts meetings with management of Goldman Sachs was the analyst's standing, influence and knowledge. "In other words," the gatekeeper added, "we evaluate you."
Friday, November 11, 2011
A WSJ article by Mike Mayo gives some interesting personal insights on the pervasiveness of agency problems in financial markets. Here's an example: