As I mentioned in my previous post, F.M. Kirby, former Chairman and CEO of Alleghany Corporation, recently passed away. To honor his life and the success of his company, I have transcribed from the 1993 annual report the section on Alleghany’s goals and philosophy:
Goals
While holding risks to a prudent level, we week to achieve:
- An average annual compound growth rate of 12 percent in earnings per share, together with a consistently high quality of earnings
- An average annual long-term return on stockholders’ equity of from 12 to 14 percent after tax
Policy and Philosophy
In pursuit of these goals, Alleghany has adopted a highly decentralized organizational structure with the following characteristics:
- Small but select parent-company staff, which sets goals for the management of our operating units, ensures that they are provided with incentives to meet these goals, and monitors their progress
- Operating units that function as quasi-autonomous enterprises
- An entrepreneurial culture quick to identify and react to opportunities
- Conservative parent-copmany capital structure, combined with ample, immediately available credit
- Primary emphasis on long-term goals, and the patience to achieve them
- Investor relations devoid of promotional activity
- Candor and clarity in our stockholder communications, together with an open door for investors who wish to learn more about us
Conservatism dominates our financial analyses. We shun investment fads and fashions in favor of investing in basic financial and industrial enterprises that offer long-term value to the investor. We are careful to distinguish between success and bigness, and have frequently taken advantage of opportunities to shrink our capitalization when our common stock has become available on attractive terms. Since 24 percent of our outstanding common stock is beneficially owned by our directors and management, to an extent unusual in corporate America their personal fortunes, as well as those of the company’s public stockholders, depend on the successful outcome of their efforts.
This philosophy is the primary reason why Alleghany has provided such excellent returns for its shareholders.
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