Stop being so naive…

avatar By: IS
Date posted: 04.08.2009 (4:00 am) | Write a Comment  (3 Comments)

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swirlingRight now, in Quebec, there is outrage because of a major loss by the main state pension fund, the CDPQ (Caisse Depot Placement Quebec), a loss of $40 billions over the 2008 fiscal year. Compared to other pension funds, the CDPQ severely underperformed its competitors and this has rightfully brought up debates about how it is being managed, bonus, compensation, etc. All of these things are reasonable and fair and with such a dismal performance, you would expect every rock to be turned in order to find not only what caused this underperformance but also the other problems that exist in the organization. Up to now, I’m fine with everything and can understand the outrage from citizens regarding the loss…

But then, one night I open the tv and see a tv broadcast where the news is about the CDPQ spending millions of dollars in hockey and show tickets for their clients. They then proceed to speak with “specialists”, business teachers that have courses about ethics, corporate governance, etc. Those “specialists” said that in such a context, CDPQ should not be spending any money on hockey tickets; that it is not part of what they are mandated to do.

That is when I feel outrage. It just seems like such an easy point to make, especially when you are speaking to the general population, where most people are far removed from the field of finance. It’s an easy story to break and you would of course have the support of the population if you tried to block such expenses but it would also be dead wrong to do so.

Fact is that in finance, as in other fields, generally salesmen provide many services to their clients. Great meals at expensive restaurants, bottles of wine, gifts, sport tickets, etc, etc. I’m not saying it’s the only thing that matters of course, but it counts. Generally, a client will prefer going with a seller that will take him out for a day of golf, all expenses included, than another one that provides the same service without the nice day under the sun. You might not like it, but that is how things are done. And they are done like this all over the world in many industries. So while I cannot of course say that CDPQ is using its sport tickets in an optimal manner, it is very simplistic to say that they should not buy any. Anyone saying that would simply not know the business.

In theory, the best service and lowest cost will get you all the clients you can handle. That is what you will also learn in school. But try that theory out for a few years, I’ll be giving out a good (as opposed to excellent) service, at a fair price, but providing my clients with hockey tickets, we’ll just have to see who comes up with more sales…

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3 Comments »

  1. Comment by OneDay — April 9, 2009 @ 2:31 pm
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    Spending a few millions annually for sports and show tickets is not outrageous. In business, you need to give an extra shoot in order to stand out among the others. It’s alright giving out tickets or inviting clients to exclusive club or going playing golf. Those are places where most conclusive deal are done.

    However I still think that the line should be defined between pleasure and business. That line is thin but should be addressed (no abuse or huge conflict of interest).

  2. Pingback by Easter Monday Notes And LinkStuff — April 13, 2009 @ 3:02 am
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    [...] The Intelligent Speculator says to stop being so naive. [...]

  3. Comment by IS — April 19, 2009 @ 8:17 pm
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    @OneDay, yep and that is really the tough line..not sure how to explain this to the populations though…

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