A Misguided Assessment of “Culture”
I just touched on something from Morningstar a few weeks ago, but I’ve got to go back to the well one more time.
Earlier this week the article Dodge & Cox is a Model Fund Family caught my eye, and it’s been on my mind ever since. The article’s intent is to analyze Dodge & Cox’s corporate culture as a key element in Morningstar’s stewardship evaluation for the firm. To be transparent on where I’m coming from, three initial thoughts:
- I conceptually understand and see merit in Morningstar’s goal to evaluate stewardship.
- However, I struggle with any assessment and judgment on culture. Culture is a byproduct of the people, dynamics, business situation, etc. of a company. It’s not an input.
- When was the last time you read a story about how awesome the culture is at a company that is performing terribly financially and/or letting people go?
In most cases, assessing culture is simply a qualitative and subjective exercise that ultimately supports preconceived notions of an organization. Dodge & Cox is a private company that has been hugely successful for 80+ years. Anyone would be hard-pressed to objectively and convincingly conclude that the culture there is one that doesn’t work.
To that end, the Morningstar article feels like a hollow exercise, and in fact one that is a bit condescending to other asset managers. The one thought that really stands out to me is this:
There are other reasons to trust the firm. It shuns marketing and advertising, has no salespeople, and has rolled out just five funds in eight decades.
Equating an aversion to sales, marketing, and product development with great culture and stewardship implies that embracing those things negatively impacts a firm. Ridiculous.
Morningstar thoughtfully updates its methodology on a regular basis. The cultural component of its assessment of funds and firms is one that I think needs to be reconsidered.