Much ink has been spilt over the conviction of Conrad Black in Chicago last week. I’ve read a few biographies of the newspaper baron (I recommend Shades of Black by Richard Siklos) and followed the case with some interest. Surprisingly, the real-life Shakespearean drama of the prodigal Canadian offers some financial lessons for little capitalists like us:
Spend less than you earn: Tom Bower suggests in his unauthorized biography that Black’s troubles can be traced back to the time when he started living like a billionaire despite having the means of a multi-millionaire. It takes a lot of money to maintain homes and domestic staff in three countries and apparently even a newspaper proprietor like Lord Black could not really afford to.
Don’t attempt to keep up with the Kravises: While it is a natural instinct to try to keep up with the neighbours, it can become a destructive habit that must be endlessly fed. Lord and Lady Black moved in elevated social circles with the likes of billionaires like Henry Kravis and his wife Marie-Josee Kravis (who also served on Hollinger’s board) and reputedly hankered after bigger private jets and a more glitzy lifestyle.
Invest in companies with shareholder-friendly management: One of Warren Buffet’s criteria for investing in a company is trustworthy management. Even before his troubles began, there is plenty of evidence that Lord Black viewed shareholders in Hollinger as a “cheap source of capital”, not as partners and co-owners of the company.
Avoid investing in companies with “country club” boards: The board of directors of a publicly-traded company is supposed to look out for the interests of shareholders. They should function as management’s watchdog and at least some of the directors should be independent. Hollinger’s board was packed with Lord Black’s social friends and cronies, who instead of following the “trust, but verify” dictum, simply rubber stamped all management decisions.
Do you think there are any other lessons to be learnt from Lord Black’s troubles?
