Till yesterday I did not agree with this, but now I am convinced.

There are many companies born every day. But not all of them will be successful. So what is the reason behind it?

Resources? No.

Promoter? Maybe but not all companies from Tata and Birla groups are thriving.

Debt level? Maybe.

Management! YES.

If there is management capability to handle the Company, no matter how few the resources are, or whether the promoter stake is low or Zero or more negligible. Housing Development Finance Corp. No promoter, but they are successful.

We saw many examples, and here I want to mention one type of investor.

Activist Investor.

If they realize that Company is not able to reward shareholders, they enter into the Company by buying Small stakes and Force management to change what is wrong with the Company.

A recent example is Yahoo. Carl Icahn entered the business and asked for rewards for shareholders.

Yes. Everything is right. But what is connecting Candid management with activist shareholders?

Simple. If the management is not candid, It will try to hide many things. They Will did not give the correct number. It’s straightforward to manipulate or Cook the Balance Sheet, and many times it’s challenging to understand for many general Investors. It affects them as the return on investment is low. At the same time, investors may lose the opportunity to earn a return. Plus, maybe management is taking rewards wrongly.

Warren Buffett, maybe that is why to make Berkshire Hathaway report, is very open about his performance. In many of his letters to shareholders, he Accepted his mistakes. As per him, buying Berkshire Hathaway was a mistake. The reason is The payment in the insurance business is front-loaded. Moreover, Berkshire Hathaway was a textile firm.

The essential point here is that Warren Buffett, Mukesh Ambani, etc. are managers and hold big Stakes. Easy for them to reward in an unethical way. But there is one statement that increases the importance of this tenet. That is

The CEO who misleads shareholders in Public may Eventually deceive himself in private.