 Good day, fellow investors. Is the management of the companies you own maximizing shareholder thus your value? And that's a very important question that many forget to ask when investing, because the goal should be that the management's goals are aligned with your goals, because after all they work for you. You're the owner of the company. In this video I will discuss how the management intentions are not always related to shareholders' intentions, a few examples and see how to go about it. So just start with some academic research for once. Graham, Harvey and Raj Gopal have found that 78% of corporate management would not look at projects that don't immediately increase value of the company, so that have long-term benefits, but not short-term benefits, because if you don't have short-term benefits your profits are lower for the short time, which means your stock price goes down, which means management doesn't get compensated with stock options and things like that. So management is really myopic when they look at what to do. They try to maximize short-term and they forget about the long-term and that's a disastrous thing to do. Just a few companies focus on long-term value creation and you focus on long-term value creation, but by focusing on increasing your tangible book value. If you look at JP Morgan's financial highlights, you can see how they have two metrics there, book value and tangible book value. And if they increase their tangible book value, they have done well for their shareholders, because what's tangible, you can sell it, it has value and if you increase that then you're increasing the long-term value of a shareholder. If the stock price goes up, if you increase the stock price by doing buybacks, you are not increasing shareholder value, you're destroying shareholder value in the long-term. Let me elaborate on that. The two companies with the largest buybacks are Apple and General Electric. General Electric has been doing huge buybacks to keep the stock price higher because the past CEO wanted to retire with a very golden parachute and that's why he was spending destroying the company doesn't matter just to retire rich. Interesting. Just let's look at the book values of the two companies. Book value has increased by very little in the last five years. General Electric, on the contrary, has lowered its book value in the last five years, so that's not really how to increase shareholder value because, okay, the stock prices could go up, but there will be a recession, so stock prices will go down and pension funds, so the owners of those companies, are not there selling buying stocks. They are owning for the long term. Now, somebody looks at the state of his pension fund and he's happy, oh, look how much money do I have, I will retire well and then there is a stock market crash because management is looking for buybacks in order to get more options and the pension is wiped out. So this short term, myopic attitude will really have terrible consequences in the future. On the private note, what can we do to don't fall under this influence? Investing companies that really focus on creating shareholder value. So, or the management owns most of the company and then they are not so much into stock options and stock prices, but increasing book value, Berkshire for example, or there are very long term compensation plans. There has been another academic research that showed that stocks on the day that they vote out a positive long term management compensation plan have an abnormal return of 1.14%, so that's a very positive. So if you see a company that's focused on the long term, you would have higher returns than focused on short term company. So it's very interesting how this compensation works. We will discuss Charlie Munger's, he's very very specific about it. So keep watching, subscribe to the channel, click like if you like the content, comment, give us examples of short term and long term shareholder value creation or distraction. I'll see you in the next video.