Small-Cap Institute Presents...

It’s one thing to have a great career in investment banking, a standout career in law, or be a long-tenured institutional investor; Joseph Manko, Jr.* has done all three. In his senior role at The Horton Fund, Joe now has a front row seat daily to the unique boardroom challenges faced by small-cap companies. SCI is confident that you’ll learn from his candid, poignant observations.

It’s one thing to have a great career in investment banking, a standout career in law, or be a long-tenured institutional investor; Joseph Manko, Jr.* has done all three. In his senior role at The Horton Fund, Joe now has a front row seat daily to the unique boardroom challenges faced by small-cap companies. SCI is confident that you’ll learn from his candid, poignant observations.

Caroline discusses several large-cap governance best practices that she believes are critical to small-cap boardroom success: (1) ethics/compliance; (2) capital allocation oversight;  (3) diversity; and (4) CEO succession planning. Long before turning 40, Caroline Tsay* had multiple large-cap senior operating roles in technology, and has also served on the boards of iconic American companies such as The Coca-Cola Company and Morningstar.  Now, nearly four years into running a software company she co-founded, there are few executives in the country who share her unique perspective about the large-cap – small-cap divide.  SCI couldn’t be happier to share some of Caroline’s thoughts.

One thing we hear constantly when speaking with accomplished CEOs is how key of a role their boards of directors played in their company's ultimate success, both in periods of growth and challenge.  John Rogers hits on this exact point from the investor perspective. SCI was fortunate to spend time speaking with John W. Rogers, Jr., Chairman, Co-CEO, and Chief Investment Officer of Ariel Investments.  Ariel manages in excess of $11 billion and started in 1983 with a core focus on small- and mid-cap companies.

We all know and appreciate the old adage: “great minds think alike.” If you listen to SCI’s interview with Garry Ridge, the high-performing CEO of WD-40, you will hear Mr. Ridge talk about the importance of corporate culture, and the importance of CEOs knowing what they don’t know. Now listen to Mr. Rogers, and you’ll immediately assimilate the “great minds.” SCI was fortunate to spend time speaking with John W. Rogers, Jr., Chairman, Co-CEO, and Chief Investment Officer of Ariel Investments.  Ariel manages in excess of $11 billion and started in 1983 with a core focus on small- and mid-cap companies.

Just as governing smaller companies is much different than governing enterprises, hiring employees is also different, according to Caroline.  Listen in particular to her thoughts about the importance of a prospective employee’s passion for the company’s mission, as well as their need for the type of job “certainty” that’s more common in larger companies. Long before turning 40, Caroline Tsay* had multiple large-cap senior operating roles in technology, and has also served on the boards of iconic American companies such as The Coca-Cola Company and Morningstar.  Now, nearly four years into running a software company she co-founded, there are few executives in the country who share her unique perspective about the large-cap – small-cap divide.  SCI couldn’t be happier to share some of Caroline’s thoughts.

You could easily be convinced by reading The Wall Street Journal and listening to CNBC that shareholder activism is a large-cap phenomenon, but in reality the opposite is true.  Most shareholder activism is in small-cap companies, and the lion’s share of campaigns are waged due to improperly comprised boards.  When asked what most requires systemic mending in the small-cap ecosystem, Joe doesn’t hesitate; his primary focus is on boards that are principally comprised of the CEO’s friends, and his example will have every experienced small-cap investor nodding their heads in unison. It’s one thing to have a great career in investment banking, a standout career in law, or be a long-tenured institutional investor; Joseph Manko, Jr.* has done all three. In his senior role at The Horton Fund, Joe now has a front row seat daily to the unique boardroom challenges faced by small-cap companies. SCI is confident that you’ll learn from his candid, poignant observations.

Every small-cap investor is concerned about revenue growth and profitability.  But executive compensation needs to be driven by incentives that are company specific versus one-size-fits-all.  Listen to Joe talk about one of his portfolio companies and how large a portion of executive compensation is focused upon key performance metrics other than EBITDA and revenue.  As Joe adroitly points out, getting executive compensation right is about in-depth company/industry knowledge as much as it is about what’s actually going to motivate a given management team. It’s one thing to have a great career in investment banking, a standout career in law, or be a long-tenured institutional investor; Joseph Manko, Jr. has done all three. In his senior role at The Horton Fund, Joe now has a front row seat daily to the unique boardroom challenges faced by small-cap companies. SCI is confident that you’ll learn from his candid, poignant observations.

Attend any corporate governance continuing education program in the U.S. and you’ll likely be told that governance is essentially the same whether you’re governing a Fortune 50 company or a startup.  Unfortunately, few of those boardroom “experts” have ever actually been involved in small, high-growth companies, so they’re unaware that governance most definitely is not one-size-fits-all.  Caroline’s thoughts on the relevance of large-cap boardroom formality and how it relates to small company boardrooms are poignant. Long before turning 40, Caroline Tsay* had multiple large-cap senior operating roles in technology, and has also served on the boards of iconic American companies such as The Coca-Cola Company and Morningstar.  Now, nearly four years into running a software company she co-founded, there are few executives in the country who share her unique perspective about the large-cap – small-cap divide.  SCI couldn’t be happier to share some of Caroline’s thoughts.

Part of being a successful small-cap investor is being a forensic observer.  Since so many small-caps aren’t covered by high quality equity research analysts, investors are left to uncover all the value – and risks – on their own.  If you think the term “forensic observer” is a bit overstated, you might think differently when you hear Mr. Rogers discuss who they hire to train their portfolio managers to expertly interview management teams.