112 The Business of Value InvestingPutting a great chief executive offi cer (CEO) in a great company
is like icing on the cake. Such was the case when Roberto Goizueta
took the top job at the Coca - Cola Company in 1981. During his
time, the Coca - Cola brand became the best - known trademark in the
world. Some of Coke ’ s most famous ad campaigns, such as “ Always
Coca - Cola ” and “ You Can ’ t Beat the Feeling, ” were launched under
Goizueta ’ s leadership. During the 16 years in which Goizueta ran
Coke, the total return on Coke stock was more than 7,100 percent. 3
A $ 10,000 investment in Coca - Cola when Goizueta took the top
job in 1981 was worth $ 710,000, including reinvested dividends,
in 1997. By all measures, the 1980s and 1990s were destined to be
great decades for the Coca - Cola Company. It benefi ted from the
untapped global demand for its product along with a historical bull
market in the United States. Nonetheless, no one doubts Goizueta ’ s
magic touch on the fortunes of Coke.
While management can make a vital difference, the value of
quality management should be subordinate to the quality of the
business. One of the fi nest companies in the world, Johnson &
Johnson, illustrates the value of the business before the manage-
ment approach. For over 100 years, Johnson & Johnson has grown
its sales and profi t by over 10 percent per annum. Clearly, the com-
pany has had more than one management team making acquisi-
tions, creating expansion plans, and developing new products.
Some of those management teams were more able and competent
than others, yet Johnson & Johnson continued to show progress. To
this day, Johnson & Johnson is one of the few companies that has
unlimited growth potential with respect to the products it sells. This
fact will remain true regardless of who steers the ship.
Understand, however, that this doesn ’ t imply that any run - of - the -
mill executive should steer the ship of the company. Incompetent
and unethical behavior can damage a company ’ s reputation. If the
business is weak, this damage can be deadly. But if the business is
loaded with strong fundamental economics, ultimately it will prevail.CH006.indd 112CH006.indd 112 9/2/09 6:58:09 PM9/2/09 6:58:09 PM