Egan Jones released a new commentary examining how leadership beyond the founder stage plays a crucial role in creating and maintaining long term corporate value and credit quality. The article notes that while entrepreneurs often receive public acclaim, "for a company to be truly great, it needs to instill the right leadership to carry on the company traditions."

The commentary highlights several examples of firms that have thrived under successor leadership. It states that although Steve Jobs is widely regarded as a business hero, "Jobs left Apple fourteen years ago, yet the firm still dominates [computing]." It adds that "Under Tim Cook’s guidance, the company has not only continued to dominate its respective markets, but also its market capitalization has grown by a factor of 10."

Similar observations are made about Microsoft and Alphabet. The article notes that Microsoft advanced from its early PC era under Bill Gates to later success under "Steve Ballmer and later Satya Nadella," and that Google, renamed Alphabet, "thrived over the past ten years under the leadership of Sundar Pichai while Sergey Brin and Larry Page garnered the accolades."

The commentary argues that "the sustainable value creation often comes with competent managers who have a deep understanding of the business," and that extending a successful product or service into broader markets is essential for building long term value and credit quality.

Turning to investment philosophy, the article discusses Warren Buffett, noting that he "started buying Apple in 2016 after Steve Jobs departure" even though Apple did not fit traditional value investor criteria. It suggests that the definition of value investing may have shifted, observing that "while the company was expensive from the traditional value investor’s perspective, assuming even some reduction in growth, the value remained and was building."

The installment concludes by stating that "there are few hard and fast rules" for sophisticated institutional investors and risk managers and expresses hope that the analysis helps identify "additional pathways."

About Egan Jones Ratings

Egan-Jones Ratings Company was founded in 1995 for the purpose of issuing timely, accurate ratings. It is a Nationally Recognized Statistical Rating Organization (NRSRO) and is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider. The firm rapidly gained credibility by flagging the failures of Enron and WorldCom and has since established itself as a leading global provider of credit ratings.

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