Do I really need to care about the CEO, the owners, or the other executives?

The short answer here is “no”, but that really depends on your investment style. If you’re a short-term technical trader who only cares about price action (the movement of a stock’s price), then whether or not an executive team has done the necessary work to develop a successor to an aging President/CEO is probably not going to matter to you at all. You probably also don’t care if the Annual Report is suspiciously light on its Management’s Discussion and Analysis section. And you definitely don’t give a single F about news that the controlling shareholder has stuffed the board with his children and grandkids (legitimate or otherwise). None of that really matters to you. But if you’re like me, and you invest in companies often for years at a time based on your opinion of how that company may perform given a set of potential variables, then you really do care how that business is owned and operated. You care that the management team provides enough context to its results to make a proper evaluation of their efforts. You care that the company is run by competent professionals and not just a busload of seat-warming family members. At least, I care about that stuff because I’ve seen that, over the long run, it takes luck and skill to be successful at operating a business, and I’d rather have my money in companies that could benefit from both.

MB bottom-line: Honestly speaking, at times, I do feel overwhelmed by what I feel my trading style demands of me. It’s sometimes exhausting to crawl through Quarterly Reports to cross-reference notes from the Annual Report to see if things the management team said about a particular issue are accurately framed, or if the numbers are hiding weaknesses that threaten any of my assumptions. My investing style can feel like a maze with “slippery slopes” around every corner. I think it takes some amount of experience and discipline to tell the difference between what is material and important, and what is just noise, because the hours that a person can burn slipping down one of those slopes are real. I'm not always right, though, and I've spent more than my fair share of nights digging in some useless hole with only my bloody hands and a broken shovel to show for it. If you’re a value investor or some other form of long-term investor, the management team matters to your bottom line in a way that it just doesn’t to a trader who is in and out of their position on that same day or that same week. Don’t let my interest in the integrity and competence of CEOs and managers distract you from your approach. Just the same as I don’t let worries about a stock’s short-term price momentum influence my thinking on a stock that I plan to hold for another two or three years. If you feel yourself blending long- and short-term investing criteria, it’s probably time to reevaluate your strategy.

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