Here is some investment advice. It may help you make money if you choose to put your hard-earned cash into mining company stocks. This advice is not based on financial acumen, but rather on an interpretation of human nature and human greed.

The January 22, 2007 New Yorker notes that Home Depot gave departing CEO Bob Nardelli more than two hundred million dollars after pushing him out of his job. Not many of us can get fired today and paid a severance bonus of $200 million tomorrow. Keep in mind Home Depot’s stock went down six percent during the years Nardelli was in charge. Damn, I should try loosing money for my employee rather than making it.

The New Yorker points out that “academics have found little evidence that higher executive pay leads to better company performance, and the recent study of three thousand companies actually found that the firms whose directors were the most well connected—and which paid their CEO most lavishly—in fact underperformed the market.”

I know of no comparable study on mining companies. Maybe there is something about mining that makes companies that pay their CEO best, the best performers. Or do mining companies follow the trend of loosing money by paying inflated CEO salaries. Beware: buy shares of the company that pays the top guy lots and you will earn less than putting your money in a bank savings account.

Through the InfoMine Companies database you can easily get the Annual Reports of most mining companies listed on worldwide stock exchanges. I undertook a simple, non-scientific experiment. I randomly looked at some mining company Annual Reports. My findings: those companies that reported losses or declining stock prices did not report how much they paid their directors, CEO or anybody else for that matter. Those mining companies that made money and/or reported stock price increases bragged about how much they paid the top dogs. Maybe there is an inverse correlation between CEO pay and mining company performance?

At any rate all this work yields one simple test: do not buy stock in a company unless they brag about how little they pay the CEO and directors.