For this episode of Planet MicroCap Podcast, I spoke with Jeff Gramm, Author of the book, “Dear Chairman.” In Episode 22 with Adam Epstein, we discussed at length the importance of corporate governance, not just for MicroCap boardrooms, but for all public companies. Since that conversation, I wanted to learn more about corporate governance and what should be done in the event that C-suite management and board of directors aren’t acting in the best interest of shareholders. I discovered the best way for me to understand this topic was anecdotally. I came across “Dear Chairman” by Jeff Gramm on a reading list, and I’m glad I did because it really helped me understand the rise of shareholder activism and the effect it’s had on corporate governance. In this interview, you will learn about his background, his approach to investing and we discuss his book, “Dear Chairman.” Reading lists are great resources as I have found, and I highly recommend adding Jeff’s book to your list.
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In this episode, Jeff and I discuss the following topics:
- Jeff's background and how he got started investing in MicroCaps
- His experience teaching a value investing course at Columbia Business School.
- Qualitative vs. qualitative approaches to investing
- His investing strategy when looking at MicroCap stocks
- What is "Dear Chairman" about and why he felt it was important to describe this aspect of financial history
- What is shareholder activism?
- Is there a difference in shareholder activism between Large Caps and MicroCaps?
- One prevailing theme that each activist observed is that the management ownership of the company was not in line with the interests of the shareholders – specifically, CEOs owning a very small percentage of the business. Why he thinks this persists, and even if a company is being run well, doesn’t that leave an operator vulnerable?
- “If shareholders continue to be passive, they will continue to shorn like sheep” – especially with MicroCaps, while CEOs are much more accessible, where he draws the line between passive and active? If everyone was active, how can the CEO run his/her business?
- What is the “Poison Pill”?
- In chapter 5, you also highlight how institutions started taking a more active approach with their holdings. How has the awakening of institutional investors impacted public company governance and is there a fundamental difference than from individual shareholders?
- Based on the many examples you gave in the book, for MicroCaps, what he thinks is the best formula for a corporate board
- Each chapter of the book highlights a new “era” of shareholder activism – what era would he says he learned the most from and had the greatest affect on his approach investing
- How he sees shareholder activism evolving
- Advice for new MicroCap investors
For more information about Jeff Gramm and "Dear Chairman", please visit:
You can follow Jeff on Twitter @jeff_gramm