Other People’s Money

There seems to be an increase in the cavalier treatment of other people’s money (OPM) by a wide variety of individuals and organizations, including corporate executives, politicians and some investment advisors. One would think that corporate executives could remember that every dollar they spend actually belongs to the shareholders. Politicians need to remember that all of their spending schemes are being funded by taxpayers. Investment advisors should be continually aware that every investment they propose is on behalf of their clients and if they wouldn’t buy it for their own portfolios, why is it suddenly suitable for their clients? Of course, doing good or doing well with OPM is so appealing.

Any effort to compile a comprehensive list of examples would require volumes. However, a recently announced $230,000 deferred compensation payment to the retiring head of Oakland University which, according to the Detroit Free Press, was expressly barred in his employment contract, can serve as a proxy. The university’s trustees defended the payment as a just reward for 20 years of service to the school.

That’s all well and good, but if the trustees felt that way, shouldn’t they have just taken up a collection among themselves, instead of using money from the school’s general fund, which is largely made up from tuition and state aid, presumably for the benefit of the students? Doesn’t doing “good deeds” with OPM feel great?

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA