Book Description

At last, some modest proof of what some of us have long suspected - beware of lords on boards. Authors Victor Niederhoffer and Laurel Kenner* studied the relationship between stock returns and the number of board members with titles in the 50 largest companies by market value in the FTSE 100. Over a five year period, the more titles on the board, the worse the performance of the shares. Niederhoffer and Kenner even invented a valuation indicator, the earnings/lords ratio, dividing the earnings per share by the number of titles in the boardroom. At the time they did the study, Powergen, with just one lord, looked the most attractive stock on this basis. The finding raises the obvious question of causality. As the authors write: "Was it the lords who caused the lackluster performance or the lackluster performance that prompted the companies to use lords as window-dressing?" That comment, however, suggests a possible American misunderstanding of the British honors system. The presence of titles on UK boards does not simply indicate the lingering influence of the ancient British aristocracy. Charities may still want to recruit Lord Ponsonby-Snodgrass just to make the notepaper look respectable; boards of FTSE 100 companies don't really need to do so. Instead, the preponderance of titles shows the tendency for the honours system to reward people for business success. Rise to the top of a FTSE 100 company and you can be pretty sure a gong is heading your way, especially if you have the foresight to make some political donations.

Comments - Reviews

"This is a wonderful book. Victor Niederhoffer and Laurel Kenner probably know more about short-term movements than anyone else. Their knowledge, based on sophisticated analysis of their unique database, underlies the findings in this book–an invaluable guide for speculators." –James H. Lorie, Eli B. and Harriet B. Williams Professor Emeritus of Business Administration Graduate School of Business, University of Chicago  Buy Now....