Rob McEwen: Public Markets Must Do Better for Investors
Rob McEwen, founder of Goldcorp and chairman and CEO of McEwen Mining, believes that investors deserve company documents that are clearer and more concise, among other things.
Rob McEwen,founder of Goldcorp (TSX:G,NYSE:GG) and chairman and CEO of McEwen Mining (TSX:MUX,NYSE:MUX), recently wrote about how he believes the public markets could be doing a better job for investors.
McEwen argued that the documents sent to shareholders by companies are often lengthy and excessively repetitive and complex, to the point where shareholders no longer have the information they need to make decisions. “It’s all about full, plain, and clear disclosure,” he said. “It’s full disclosure but it’s not plain and it’s not clear.”
Watch the interview, or read the full transcript below, for more of McEwen’s thoughts.
INN: I am Teresa Matich with the Investing News Network. Here with me today is Rob McEwen. He’s the founder of Goldcorp and current chairman and chief owner of McEwen mining. Thank you for joining me.
RM: Pleased to be here, Teresa. Thank you.
INN: The Sprott Conference was taking place recently and you were talking about a bit of a mining rant that you had. Can you tell me a bit about that?
RM: Yes, it was something published in the CIM, the Canadian Institute of Mining Magazine. And it was about some of the issues that I see that are wrong in the public markets. One is that we push all sorts of information to our shareholders and they’re usually very large documents. They’ve very difficult to read and I most of them I think end up in a garbage pail before they’re read because they’re so long and mind-numbing. I really think we need to simplify that. I think that our auditors and our security lawyers have to change a lot. I mean, when you get a financial statement that has 25 to 50 pages of notes. Who’s going to read it?
And yet, it’s all about full, plain, and clear disclosure. It’s full disclosure but it’s not plain and it’s not clear. We have to move back to that because I think a lot of investors are thinking, maybe management’s trying to fool me or lie to me by giving me all this information that I don’t understand. It’s almost like we’re making investors illiterate. In the legal profession, with securities law, I’m also concerned that as the years have gone by, the number of rules and regulations have increased dramatically. There almost seems to be a direct positive correlation between the size of the rule book and the size of the frauds that are being perpetuated on the public. The rules aren’t protecting us. You look at Bernie Madoff, he stole $60 billion. You look at Enron, there are all sorts of stories. They’re endless. And you say, when we have more rules, shouldn’t we should have smaller frauds?
But it’s not happening. So, you go…why don’t we simplify this? I think it’s time to have Moses come down from the mountain for the second time and just say, here, carved on these tablets are the ten security rules that everybody lives by. When everybody knows the rules then you can spot a thief from across the room and you can call them out. But today there are so many rules, there’s no one person in the world with the capacity or ability to understand all of the rules and regulations. So it’s easy for people to hide behind.
INN: Yeah, of course.
RM: So, we need to simplify that. And the other part of the rant was, governments around the world made a habit of taking deposits from companies and their shareholders. I said, it’s time that we have a contract with governments that sets out all the terms of the engagement. If you break it you pay. So, right now mining companies go in, they have to post bonds for environmental and other purposes. They have to build community service that those governments should have built long ago for their citizens. And then they change the rules. They increase the taxes, they change the ownership structure. I’ve said, it’s time for the mining industry to push back against governments and say, we have a contract. You break the rules, you pay. You post the bond, and you post it in an international financial center outside your country, outside your law, and that bond is there. We have an arbitrator in one of those centers and they award the company if the country fails to honor the agreement. That’s going to take a little longer I think.
INN: Yeah. And there’s definitely a sense I think in the world outside of mining, that everybody in mining has tons of money and they’re just greedy, but mining can do a lot of good and in fact, you’ve done some good recently with the money you have.
RM: Mining does a lot and I think it’s a generous industry, the people within it. Mother Nature’s been very kind to me and we’ve been fortunate to be able to share. We set up a center for medical research. It’s called the McEwen Center for Degenerative Medicine that deals with stem cells. What I’m particularly excited about, we gave out a prize of $100,000 a year to researchers around the world. Our first recipient was a Japanese researcher that was able to take a skin cell and reverse engineer it into a stem cell. And from a stem cell it can become any part of your body.
RM: Now, the really important aspect of this research was there was all sorts of controversy around stem cells and the sources of them coming from the embryo. His discovery jumps over all of that controversy and takes it away. So two years after he won our prize he won the Nobel Prize for that same piece of research. So then, I went, alright, our goal is to see how many more Nobel Prize winners we can find and hopefully we can find some of them in Canada and encourage them.
INN: That’s a good goal to have. Back to your investor rant, what would you like to see…specifically in the way of the ten commandments that you’re talking about?
RM: Well one is simplification. Keep it simple, keep it clear, keep it small in number so it’s very easy for everybody to understand. You need the legal profession, I mean, when you look at a prospectus, do you have to read 15 pages of risk factors? Do you need financial statements that are that extensive? All the repetition that goes into that documentation.
And also, shareholders bought the company. They must have done some research on it. Don’t assume they’re idiots. The law right now presumes right now that everybody who’s running the public companies are crooks. And really, there may be a criminal element, but it’s a very small segment. Don’t put the whole industry through that type of hurdle to get over.
INN: Yeah, I guess it’s understandable if you look back to the 80s …
RM: Well, criminals are distributed throughout society but not everyone is a criminal. Otherwise society wouldn’t work. Most of us are very honest and want to be treated that way.
INN: What can investors do in the meantime to deal with this situation better?
RM: They can start pounding the table. They can start saying, “you’re giving me a document I can’t read. I don’t want it. Rewrite it. Write it in simpler terms.” Go to security regulators and say, “I want to understand these rules so I can know when I shouldn’t put my money in here. I shouldn’t put my money with this guy Bernie Madoff, and he’s going to take it from me.” The accounting profession, I think it’s time for individual investors, for management, for people that are financial advisors to go back and say yes, there is something wrong with the system and we want to change it. Sort of like that movie, I’m mad as hell and I’m not going to take it anymore.
INN: Thank you so much for joining me, Rob.
RM: Thank you.
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Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.