Carl Icahn believes the US must change its method for selecting CEOs in order to stay competitive in the world “and get us out of an extremely dangerous financial situation.”
Icahn says too many US corporations are terribly run
Writing on his brand new Yahoo Finance Tumbler page, the highest profile investor to date on the Yahoo’s application said that too many US corporations “are terribly run” and there’s no system in place to hold the CEOs and Boards of these poorly run companies accountable.
Icahn didn’t go into great detail regarding the “dangerous financial situation,” but he did note “whether it be monetary policy, unemployment, income inequality, the list can go on and on.”
The solution is better corporate management. He said if corporations are more productive and profitable it will improve unemployment and other issues ailing the economy.
Icahn says an asset bubble is upon
Icahn backs a recent suggestion by US Federal Reserve Chair Janet Yellen that an asset bubble
is upon us as he outlines the potential problems. “We can no longer simply depend on the Federal Reserve to keep filling the punch bowl,” he wrote.
Icahn also noted the pension fund problem. Highlighting the pension problem, Icahn cites a study by Bridgewater Associates founder Ray Dalio that calculates 85% of public pension funds going bankrupt in three decades and only able to achieve 4% returns on their assets.
Icahn says “these inexcusable numbers are mainly due to pension and mutual fund managers” who don’t question current management and support their efforts “regardless of their effectiveness on shareholder value.”
Public investors should be ready for the asset bubble burst
Icahn said the investing public needs to be ready when the asset bubble bursts, but didn’t speculate as to the date of such an implosion. “Our current system of corporate governance protects mediocre CEOs and boards that are mismanaging companies and this must be changed,” he charged. “With this system we will not meet the needs of Main Street America, nor will we be ready for when the asset bubble we have today bursts – whether it is the next one, five, ten, or 20 years.”
Icahn says the solution to the problem is simple. The solution is more shareholder activism.
After this pronouncement to save the world, Icahn dove into his fund’s recent positive performance. Among the compelling facts regarding his activism, Icahn notes that the annualized return of a person who invested in companies where an Icahn representative joined the board and sold when the Icahn representative left the board, the investor would have obtained an annualized return of 27 percent.
“If a company is doing more poorly than its peers we take a hard look, and in a number of these cases the CEO is not the right person to be running the company, Icahn wrote. “True corporate democracy does not exist in America and as a result many unfit CEOs are not held accountable.”