Cramer: Invest More in the Company, Less in the CEO
We need to start putting more weight on the company and less weight on the individual at the helm, Jim Cramer said Wednesday on CNBC's "Mad Money."
Cramer contemplated the value of a company versus its CEO and cited a slew of examples where businesses are branded first and foremost by their leaders.
Berkshire Hathaway, for instance, might as well be called "Warren Buffett Inc.," Cramer said, since Buffett's disclosure of his prostate cancer diagnosis prompted Berkshire's stock to drop immediately.
"For many people, he is Berkshire Hathaway," he said.
A Buffett-less Berkshire won't get the same results, but Cramer suggested that "a fresh pair of Buffett-trained eyes might be a positive." Cramer also tied Berkshire's assets to a cyclical trend dependent on the housing and construction markets and said that if those sectors recover, the company should perform better regardless of who's running it.
"The emotions should be more mixed about the possibility of a leadership change down the road," he said. "That's not heresy. It is a reality."
Cramer cited Facebook as another example. Shortly after filing for its initial public offering, CEO Mark Zuckerberg bought Instagram for $1 billion without consulting his board of directors, Cramer said. On one hand, Cramer questions whether a 27-year-old executive should be able to make decisions unchecked. Then again, it could be another story if the deal is profitable.
Chesapeake Energy falls into a similar category, Cramer said. According to Reuters, CEO Aubrey McClendon borrowed $1.1 billion to maintain his personal stake in the company's wells. After the news came out, the stock plummeted.
"Although both Chesapeake and McClendon said today that these transactions don't represent a conflict of interest, I can't see how they're good business," he said. "Someone has to protect the shareholders if McClendon won't."
And then, of course, there's Apple.
"Not only was it worth investing in Steve Jobs, Inc.," Cramer said. "But he left a company that's thrived in his absence. Whether you think that's due to CEO Tim Cook's stewardship or because of the ideas that were on the drawing board while Jobs was still alive, it's working."
The bottom line: "This business is about making and losing money," Cramer said. As long as the CEOs are doing a good job and are honest about the risks they are taking, then he's square with it.
"Simple litmus test," Cramer said. "But one that's made me a ton of money over the years and I think it can work for you, too."
—Read on for Cramer's Preview of Thursday's Spanish Bond Auction
When this story was published, Cramer's charitable trust owned Apple.
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