Yardstick for Management Performance

The yardstick for measuring management performance should be delivering a better return than the index over a five-year period. If management fails to outperform the index, then it indicates a failure in their job. Even though the latest annual shareholder letter did not address the issue directly, there was a forecast in the 2012 report that a streak of five-year wins would end if the market continued to advance. The acknowledgement was clear that sustained strong performance over five years would lead to underperformance against the S&P, a trend that is expected to continue in the future.