DaimlerChrysler AG (NYSE:DCX) shares moed up $1.78, or 2.71%, to $67.58 after Cerberus Capital Management executives met with the struggling automaker this week to discuss a potential bid. This news comes as the Blackstone Group is also set to meet with management later this week, according to the Detroit News. Interestingly, some investors are also speculating that GM could also be a potential suitor. Multiple interested parties is definitely good news for shareholders as there is potentially room for a bidding war, which we know from Equity Office Properties (NYSE:EOP) can be extremely profitable!

Shares of the GermanAmerican manufacturer hit a seven-year high last month when CEO Dieter Zetsche put "all options on the table", opening up the possibility of a sale of the company. The stock has seen significant volatility due to speculation, having moved from a low of around $45 per share in mid-2006 to a high of $74.53 before retracing to around $67 per share. Meanwhile, CEO Tom LaSorda stated last month that any official word on the buyout speculation could be months away. So, what's the next move for investors? Well, many investors are waiting to gauge the interest of the two parties in Chrysler before taking a stake; however, if the two parties turn out to be interested, it would mean significant share appreciation for shareholders! This makes DCX a stock worth watching!

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Inter Tel, Inc. (NDAQ:INTL) shares moved up $0.20, or 0.87%, to $23.27 today after Steven Mihaylo filed a Schedule 14A to solicit proxy materials and nominate his slate of five directors to the company's Board. Mr. Mihaylo, a 19.4% stakeholder, first contacted the Board of Directors on January 19, 2007, when he sent a letter expressing hope that the two parties could develop a plan of action to lead the company forward with a renewed focus on enhancing shareholder value in the near and longer term. On January 22, 2007, Mr. Mihaylo received a response letter from the company expressing appreciation for the constructive tone and indicating that the company would contact him shortly to discuss the ideas raised in the letter. Following this exchange, Mr. Mihaylo and the company held several discussions in an attempt to resolve the differences between the two and avoid a proxy contest. However, these discussions were unsuccessful.

What changes does Mr. Mihaylo want to make? Well, his January 19th letter outlined nine major changes:

1. Consider reducing the size of Inter-Tel's Board from 11 to 10 members, with the Board consisting of (a) the Chief Executive Officer, (b) Dr. Puri, Mr. Urish and me, (c) three other existing outside members of the Board, and (d) three new independent directors mutually acceptable to the Board and me. Alternatively, in order to save costs and facilitate the scheduling of Board meetings, I would be amenable to a 7 member Board, consisting of (a) the Chief Executive Officer, (b) Dr. Puri, Mr. Urish and me, and (c) three new independent directors mutually acceptable to the Board and me.
2. Retain a financial advisor to advise the Board on the feasibility and financial impact of a Dutch-auction self tender offer to repurchase between $200 million and $250 million of the Company's common stock.
3. Disband the Special Committee, thereby eliminating all of the costs associated therewith.
4. Direct management to (a) undertake an intensive cost-benefit analysis of (i) discontinuing product development on the Axxess and (ii) redirecting the engineering effort to "gateway" products and "hosted services" offerings, including the necessary billing platform for hosted services, and (b) report the results of that analysis to the Board. I believe these actions will produce significant cost savings and provide significant sales opportunities.
5. Consolidate the Company's multiple engineering facilities into the Chandler location. This will reduce overhead and improve productivity, while encouraging new and better ways to speed up product development.
6. Explore the sale of the Company's Irish subsidiary, unless its performance significantly improves within a set period of time. This would enable management to concentrate on more profitable opportunities, as well as raise additional cash to offset the costs of the self tender offer.
7. Explore ways to better utilize the Company’s 15 acre campus in Reno.
8. Undertake an evaluation of the recommendations in the consulting report that the Mihaylo/Vector Group provided to Inter-Tel as a result of the Settlement Agreement executed in May 2006.
9. Defer implementation of the proposed by-law amendments until the foregoing issues are actively considered.

Many of these changes would create immediate value for shareholders while others are focused on improving the company's longterm prospects. Stock repurchases tend to increase the stock price while the sale of the company's Irish subsidiary would likely generate a substantial amount of cash. Meanwhile, the other cost cutting measures outlined could help boost earnings per share in future quarters. Combined, these recommendations make a lot of sense (and we have no communications from the company explaining the issues they had with them). And with Mr. Mihaylo's 19% stake in the company, a proxy contest could have some traction. This makes INTL a stock worth watching!

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Citigroup (NYSE:C) launched a $10.75 billion takeover bid for Japanese brokerage Nikko Cordial, offering cash to the scandal-hit firm's shareholders in a deal designed to transform its business in the world's second-biggest economy. Citigroup, the largest U.S. bank but a small player in Japan outside of corporate investment banking, said it would pay a premium to Nikko's closing price on Tuesday to lift its stake in Japan's third-largest securities firm from just under 5% percent to at least 50%.

CBS (NYSE:CBS) it is buying back about 47 million shares of its Class B stock for $1.4 billion through an accelerated repurchase transaction. The cost of the repurchased shares is subject to adjustment.

U.S. box office revenue reversed a three-year slide in 2006, with sales rising 5.5% to $9.49 billion, according to an industry group. The 607 films released in 2006, which include both major motion pictures released by MPAA members and smaller, independent releases ,marked an all-time high for a single year and an 11% increase over the 549 movies that hit theaters in 2005. Globally, box offices tallied $25.8 billion in sales, up 11% from $23.3 billion in 2005. International distribution and home entertainment sales account for a significant portion of major U.S. films' revenue.

Koch Industries, the world's second-largest private company, plans to team up with private equity firm Blackstone Group to join the bidding for GE Plastics, according to sources close to the process. The auction for GE Plastics, a unit of General Electric, comes amid concern that the profitability of the unit is eroding, and that the price tag on any deal is shrinking.The four leading bidders for GE Plastics - Apollo Management, Blackstone, Carlyle Group and Kohlberg Kravis Roberts & Co. - have signed agreements promising not to team up with each other, according to two sources involved in the process. GE Plastics recorded revenue of $5 billion for the first nine months of 2006, and profit of $560 million.

Strong earnings reports from apparel retailers and an online payment processing company boosted shares in Tuesday's after-hours electronic trading session.
Chico's FAS Inc. surged $1.17, or 5.7%, to $21.59 in the extended session, after the apparel maker and retailer beat Wall Street revenue expectations with its Q4 results, despite heavily discounted merchandise. Higher expenses dragged down quarterly profit, for the Fort Myers, Fla.-based company, however.

Payless Shoesource Inc. (NYSE:PSS) climbed $1.97, or 6.2%, to $33.40 in the late session, after the discount shoe retailer said it swung to a Q4 profit.
Canadian electronic payment processing equipment maker Optimal Group Inc. rose $0.99, or 12.7%, to $8.79 in the extended session.

Avalon Pharmaceuticals Inc. (NDAQ:AVRX) shot up $1.27, or 27.4%, to $5.90 after the Germantown, Md.-based company said it is collaborating with Merck & Co. to develop inhibitors for an undisclosed target, focusing on cancer.

CV Therapeutics Inc. (NDAQ:CVRX) plunged $3.20, or 26 %, to $9.10 in the after hours session, after the biotech said its angina drug ranolazine, or Ranexa, failed to meet its goal in a late stage study.

The Topps Co. (NDAQ:TOPP), maker of baseball cards and Bazooka bubble gum, has accepted a $385.4 million takeover offer from a buyout group that includes former Disney CEO Michael Eisner. The buyout group, which includes The Tornante Co. LLC, founded by Eisner, and the Chicago-based private equity firm Madison Dearborn Partners LLC, has agreed to pay $9.75 for each Topps shares, which represents a premium of 9.4% over the stock's Monday closing pricing of $8.91 on the Nasdaq Stock Exchange. In a sign that some investors think the bidding could go higher, Topps shares rose $0.90, or 10%, to close at $9.81 on the Nasdaq Stock Market. Its shares have traded between $7.50 and $10 over the past 52 weeks.

The DJ Wilshire Pharmaceutical Index jumped 1.2% to close at 2325.03 and the DJ Wilshire Biotechnology Index rose 1.1% to close at 3013.76. Novartis AG was the big mover among the large pharmaceutical players, its stock advancing 6% to close at $56.85. Intermune Inc. shares plunged 21% to $22.15. The biotech group is discontinuing a Phase III clinical trial for its pulmonary drug candidate Actimmune due to poor interim results. Pozen Inc. shares leapt 10% to $15.70. The drug developer announced favorable results from an early-stage clinical study of its aspirin product PA 325. The drug candidate combines aspirin and a proton pump inhibitor drug to combat gastrointestinal bleeding, a known side effect of aspirin.

Shares of RadioShack Corp. (NYSE:RSH) took back a week's worth of losses, finishing up 4.2% at $25.45, a 20-month closing high.

Circuit City (NYSE:CC) shares bounced off 15-month lows to settle at $17.96, up 2.8%. Share of Best Buy Co., the nation's largest electronics retailers, added 2% to $46.52.
Shares of Ann Taylor Corp. were higher by 3.5% at $35.31. The shares got a boost after Banc of America upgraded them to a buy from neutral with a $42 a share price target.
shares of Warnaco Group Inc. jumped 11.4% at the close to $27.58. Morgan Keegan & Co. raised its rating to outperform.

Alltel Corporation (NYSE:AT) is reportedly seeking a buyer but may experience some difficulty, according to reports from the Wall Street Journal. The WSJ reported that Alltel had already approached AT&T, Verizon Communications, and Sprint-Nextel regarding a possible sale of the company. However, a potential deal-breaker lies in the company's high market valuation, which currently stands at around $22 billion. Some analysts think this number could get as high as $30 billion in the event of a buyout, which could be too much for any one buyer to pay. If the buyout efforts fail, many investors believe that the company's shares could trend towards a lower valuation.

What makes Alltel a potential buyout target? While the company only has about a fifth of the customers of AT&T and Verizon, they do operate the nation's largest wireless network geographically. As a result, the company has many "roaming" agreements that allow customers from larger carriers to roam beyond their coverage areas without incurring large roaming fees. As a result, if AT&T decides to pursue an Alltel deal it could spur a competition with Verizon, who would likely seek to prevent a deal. Why? Well, if AT&T purchased Alltel it would jeopardize the roaming agreements that Verizon has in place. This makes AT a stock worth keeping an eye on over the next couple of months.

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PDL BioPharma, Inc. (NDAQ:PDLI) shares moved up $0.73, or 4%, to $18.99 after Daniel Loeb's Third Point disclosed a 7.5% stake in the company and expressed disappointment and concern over the company's high rate of spending and significant underperformance. The Schedule 13D filing contained a letter urging the company to cut costs and not pursue additional acquisitions. Daniel Loeb also offered to work with the company to streamline the company's cost structure and asset base in an effort to allow the cash generating ability and value of the company to be developed and made apparent to shareholders.

Here's a sampling of what Daniel Loeb wrote in his lengthy letter to management:

We believe that the significant value inherent in the Company's product line, royalty revenues and R&D pipeline has been obscured by excessive overhead and apparently undisciplined research spending. We at Third Point have had substantial experience working strategically with healthcare companies to enhance value and we would welcome the opportunity to share our views and work constructively with you to help put the Company on the right track. We believe that, with our timely input, the Company should be able to reverse its significant underperformance.

I am certain that you and the Board share our consternation that since January 1, 2004, the Company's share price has remained flat versus a 50% increase in the biotech index (BTK). This is particularly troubling given that the Company has received approximately $400M of royalty revenues over this time period, largely attributable to several of biotech's fastest-growing products, including Genentech's Avastin and Herceptin. By comparison, Genentech shares have doubled over this time period.

Underlying our approach is our strongly held belief that PDLI's shares are significantly undervalued due to the market's worry that the Company is squandering valuable cash flow on undisciplined R&D spending as well as its concern that the Company will make another acquisition. We estimate that between now and the end of 2014, PDLI will generate close to $2.2B in revenues from its royalty stream. Discounting this back at the current cost of capital, we calculate that this revenue stream is worth $1.8B today, just slightly below PDLI's current market capitalization. In addition to these royalties, specialty pharmaceutical revenues should approximate $200M in 2007 and the Company has other valuable assets: an exciting, albeit slowly-progressing, product pipeline; undisclosed royalties that extend beyond 2014; approximately $430M in net operating loss carry-forwards; real estate and other assets that can be monetized; and a valuable antibody technology platform that should continue to generate new compounds over time ... Our preliminary analysis shows that PDLI should, with some cost-cutting, be able to earn $1.00 per share in 2008 and to increase that to $1.50 per share in 2009.

Many other investors have also expressed concern, recently recommending that the company put itself up for sale. This led to the company's implementation of a poison pill, preventing any hostile takeover of the company. Daniel Loeb said he understood the rationale behind the poison pill and reassured the company that he was not interested in pursuing a sale, but rather helping the company turn itself around through internal improvements. Third Point has a rich history of actively unlocking value in many of its investments, so this move makes PDLI a stock worth watching!

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New Century Financial Corporation (NYSE:NEW) shares moved down $8.26, or 56.38%, to $6.39 today after several analysts agreed that the nation's largest subprime mortgage lender would likely face liquidation or bankruptcy. The troubled company had already been experiencing a large increase in subprime defaults when it announced late Friday in a 12b-25 filing that it is technically in default with several lenders and that federal regulators have begun an investigation. While the company said it received waivers from six out of the eleven lenders, deals remain uncertain with others. Meanwhile, the company disclosed that the U.S. Attorney's Office was conducting a federal criminal inquiry into trading of NEW securities as well as accounting errors. Finally, the company revealed that it would be unable to file its 10-K annual report by the March 1, 2007 deadline because it needed to correct errors that it discovered relating to the financial reporting of loan repurchase losses.

Many analysts now believe that the company will likely face liquidation or bankruptcy. Consequently, investors must now attempt to evaluate how much they would receive in the event of a liquidation or bankruptcy. It is important to remember that common stock shareholders are at the end of the bankruptcy line; all lenders and preferred stock shareholders must be paid off in full before anything is distributed to common stock shareholders. Moreover, the company's primary assets are mortgage securities, which are notoriously difficult to value - especially with no guidance from the company. Despite this difficulty, some analysts have created an estimate. Bear Stearns analysts believe that the liquidation value should be close to $8 to $9 per share, down from their previous forecast of $10 to $11 per share.

Many traders are also watchful of the high short interest in the stock. When someone short sells a stock, they are essentially borrowing shares that they must buyback at a later time. Therefore, when there is a high short interest and the stock jumps up in value (generating a loss for those short selling) some are tempted to buyback their shares. This buyback adds even more steam to the bullish rally, potentially causing even more short sellers to cut their losses and buyback shares. This is known as a "short squeeze" among traders, and some consider it a possibility in this scenario.

Regardless, this is certainly a stock to watch. There are clearly problems with the company that carry a lot of risk; however, there may turn out to be opportunities to buy based on liquidation value and/or a potential short squeeze. While there isn't enough information to do anything but speculate now, there will be much more information available when the company is able to file their 10-K annual report with the SEC later next month.

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Palm, Inc. (NDAQ:PALM) shares moved down $1.05, or 5.74%, to $17.25 after it was downgraded by JPMorgan analyst Paul Coster. The move follows recent speculation that the company may be interested in putting itself up for sale, which helped jump the stock price over 10% on Friday. Those rumors were somewhat confirmed today after the Wall Street Journal reported today that the company is working with Morgan Stanley to evaluate its options, citing people familiar with the matter. There is speculation that these options could include a sale to Nokia Corporation (NYSE:NOK) or a private equity firm. But Palm has been considered a buyout target for years, is now finally time?

Many investors believe that Palm is an attractive buyout target for several reasons. The obvious reason is the fact that Palm owns Treo, which is the second best selling smart phone behind Research in Motion Limited's (NDAQ:RIMM) Blackberry. The Treo is carried by 85 different carriers around the world, which gives it a huge advantage over new market entrants. The lesser known reason why Palm is a good target involves its financials. Palm currently generates $15 of sales per share, which gives it a price to sales ratio of one compared to RIMM's P:S ratio of ten. Meanwhile, Palm is also sitting on $500 million in cash and an additional $500 million in NOLs (net operating loss carry-forwards), which can offset taxes in any acquiring company. And finally, there would be a lot of synergies between Palm and other players in the market. When company's look at possible acquisitions, they look at how they could leverage their existing infrastructure to reduce costs in their acquisition. In Palm's case, many investors are betting that a buyer could cut at least 20% of their operating costs through economies of scale, which equates to a $1/share gain in cost savings alone!

So, if Palm were to be acquired, how much would a buyer pay? Many analysts believe that given the company's ownership of the Treo, NOLs, cash on hand, and other intangible assets, Palm could sell for as much as $25 per share. Remember that speculation of a Palm sale has been going on for years now, so don't get too excited. But this is definitely a stock to keep on the radar as the company mulls its options with Morgan Stanley!

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Great Atlantic & Pacific Tea (NYSE:GAP) plans to buy rival grocer Pathmark Stores for $678.6 million, creating a larger company to compete in the U.S. Northeast. The deal, which the companies had signaled in late February, will create a 550-store, $11 billion supermarket chain operating in the New York, New Jersey and Philadelphia areas, as well as in Maryland, Michigan and Louisiana. The combination marks the latest merger in the quickly consolidating grocery-store industry.

Advanced Micro Devices (NDAQ:AMD) the No. 2 maker of microprocessors, said it does not expect to meet its previous first-quarter revenue forecast, sending its shares lower. The company, which trails Intel in the market for computer chips, said revenue would fall short of its earlier quarterly target of $1.6 billion to $1.7 billion.Wall Street analysts, on average, had expected revenue of $1.65 billion.

The Seminole Tribe of Florida completed its $965 million purchase of the Hard Rock cafes, hotels, casinos and music memorabilia from The Rank Group PLC (LON:RNK) through a combination of a bond offering and an equity contribution from the tribe. In a Rank Group earnings report filed Friday, Hard Rock International reported operating profits increased 18.7% to $74.8 million, from $63 million the year before. It saw continued growth and improvement in all four business divisions comprising company-owned cafes, franchise cafes, and hotels and casinos.

Shares of InterMune Inc. (NDAQ:ITMN) crumbled Monday evening after the biotech firm announced its decision to discontinue a clinical trial, while shares of ADC Telecommunications Inc. gained after the company said it swung to a quarterly profit on higher sales. InterMune shares dropped 19% to $22.70 after the company said it has discontinued a Phase III clinical trial evaluating its Actimmune drug in patients with idiopathic pulmonary fibrosis.

ResCare Inc. (NDAQ:RSCR), which provides residential and therapeutic services to people with developmental disabilities, released that its Q4 profit rose sharply on higher revenue and a more favorable tax treatment. The company posted net income attributable to common shareholders of $7.7 million, or $0.28 per share, from $505,000, or $0.02 per share, a year ago. Adjusted income from continuing operations totaled $0.34 per share. Q4 revenue increased 24% to $337.1 million from $270.9 million in the year-ago period. Analysts had expected $340.6 million in sales.

Universal Power Group, Inc. (AMEX:UPG), a leading provider of third-party logistics and supply chain management services and a global distributor of batteries, security products and related portable power products, announced its financial results for the Q4 and year ended December 31, 2006. For the three month period ended December 31, 2006, UPG reported revenue growth of 15.3% to $24.6 million, compared to $ $21.3 million in the prior year period.

Copano Energy, L.L.C. (NDAQ:CPNO) announced its financial results for the three months and year ended December 31, 2006. The company’s net income increased by 16% to $16.5 million, or $0.86 per share, for the Q4 of 2006 compared to net income of $14.3 million, or $0.84 per share, for the same quarter the previous year.

Private equity group Vector Capital plans to acquire information security company SafeNet (NDAQ:SFNT) for approximately $634 million. The $28.75-per-share price represents 12% premium over SafeNet's average closing share price during the 30 trading days ended last Friday.

Great Wolf Resorts, Inc. (NDAQ:WOLF) shares moved up $0.18, or 1.36%, to $13.37 today after Jason Ader demanded that the company maximize shareholder value by immediately putting itself up for sale in a Schedule 13D/A filing with the SEC. The 7.78% shareholder continues to believe that management is simply unable to unlock shareholder on its own and expressed its disappointment with management's refusal to explore a possible sale. This comes after they made similar recommendations to the company back in August.

Why should the company be put up for sale? According to Mr. Ader, the company's management is simply unable to effectively capitalize on a growing market that is attracting more and more private equity and investment interest. While WOLF once dominated the indoor water parks market, there are now new, better capitalized and savvy developers. Mr. Ader noted that: the company just took large, non-deductible write-offs for goodwill impairment at two of their major resorts, development and construction costs are increasing (together with competition), and the company's prospects as a stand-alone aren't materially brighter today than they were last year. Meanwhile, the market continues to ignore and undervalue the company despite four analyst buys with a $16.50 target. According to Mr. Ader, "I continue to believe there is intrinsic value in the business, but I don't have confidence that current management or the current board can - on their own - unlock this value for shareholders.  I find it irresponsible that Mr. Emery simply refused to return any follow-up calls from the UBS bankers - and has not begun any alternative sale process. Now is not the time to continue to wait for performance to bail you out.  As I said last August, it's not happening."

Mr. Ader attached two charts to his filing to illustrate the company's failure:

Here it is very clear that WOLF started out by outperforming its peer group, but quickly deteriorated to its current levels. And a comparison with the overall market is no better:


Clearly, WOLFs shares have been underperforming both their peers and overall market averages. In the end, Mr. Ader believes that other large shareholders share his sentiment, and that there would be significant interest within the private equity community - or among the strategic players - in a transaction involving WOLF. Consequently, he is again demanding that the company at least hire an investment banker to explore possible strategic alternatives. If the company refuses, it will be interesting to see if Ader would consider going as far as a proxy fight to unlock value. Alternatively, we could see additional institutional shareholders voice their support for these ideas. Either way, if the company agrees, we could see significant share appreciation. This makes WOLF a stock worth keeping an eye on!

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Berkshire Hathaway's (NYSE:BRK) Warren Buffet released his annual letter to shareholders yesterday, announcing a $16.9 billion gain in net worth. Many investors consider the Oracle of Omaha's annual letter to shareholders required reading, as Buffet offers his views on the economy and general market outlook. What does Buffet think about the future of our economy and stock market prospects? Let's take a look...

On the economy, Buffet commented:

As our U.S. trade problems worsen, the probability that the dollar will weaken over time continues to be high. I fervently believe in real trade – the more the better for both us and the world. We had about $1.44 trillion of this honest-to-God trade in 2006. But the U.S. also had $.76 trillion of pseudo-trade last year – imports for which we exchanged no goods or services. (Ponder, for a moment, how commentators would describe the situation if our imports were $.76 trillion – a full 6% of GDP – and we had no exports.) Making these purchases that weren’t reciprocated by sales, the U.S. necessarily transferred ownership of its assets or IOUs to the rest of the world. Like a very wealthy but self-indulgent family, we peeled off a bit of what we owned in order to consume more than we produced.

The U.S. can do a lot of this because we are an extraordinarily rich country that has behaved responsibly in the past. The world is therefore willing to accept our bonds, real estate, stocks and businesses. And we have a vast store of these to hand over.

These transfers will have consequences, however. Already the prediction I made last year about one fall-out from our spending binge has come true: The “investment income” account of our country – positive in every previous year since 1915 – turned negative in 2006. Foreigners now earn more on their U.S. investments than we do on our investments abroad. In effect, we’ve used up our bank account and turned to our credit card. And, like everyone who gets in hock, the U.S. will now experience “reverse compounding” as we pay ever-increasing amounts of interest on interest.

I want to emphasize that even though our course is unwise, Americans will live better ten or twenty years from now than they do today. Per-capita wealth will increase. But our citizens will also be forced every year to ship a significant portion of their current production abroad merely to service the cost of our huge debtor position. It won’t be pleasant to work part of each day to pay for the over-consumption of your ancestors. I believe that at some point in the future U.S. workers and voters will find this annual “tribute” so onerous that there will be a severe political backlash. How that will play out in markets is impossible to predict – but to expect a “soft landing” seems like wishful thinking.

On executive compensation, he noted:

You’ve read loads about CEOs who have received astronomical compensation for mediocre results. Much less well-advertised is the fact that America’s CEOs also generally live the good life. Many, it should be emphasized, are exceptionally able, and almost all work far more than 40 hours a week. But they are usually treated like royalty in the process. (And we’re certainly going to keep it that way at Berkshire. Though Charlie still favors sackcloth and ashes, I prefer to be spoiled rotten. Berkshire owns The Pampered Chef; our wonderful office group has made me The Pampered Chief.)

CEO perks at one company are quickly copied elsewhere. “All the other kids have one” may seem a thought too juvenile to use as a rationale in the boardroom. But consultants employ precisely this argument, phrased more elegantly of course, when they make recommendations to comp committees.

Irrational and excessive comp practices will not be materially changed by disclosure or by “independent” comp committee members. Indeed, I think it’s likely that the reason I was rejected for service on so many comp committees was that I was regarded as too independent. Compensation reform will only occur if the largest institutional shareholders – it would only take a few – demand a fresh look at the whole system. The consultants’ present drill of deftly selecting “peer” companies to compare with their clients will only perpetuate present excesses.

Clearly, Buffet offers some valuable insight here that can be applied to far more than just Berkshire Hathaway. I encourage you to read his full letter here, as it contains far more information on different sectors, governance, advice on valuing securities, different ancedotes, and much more. It is definitely required reading for all long-term value investors.

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