The Value of Shareholder Friendly Management

When it comes to choosing companies to invest in, many investors prefer companies with shareholder-friendly management techniques. This type of management puts an emphasis on making things favorable for the shareholder and keeping them happy. Here are a few things to consider about the value of shareholder-friendly management.

Investments Held within Their Company

One feature that can be considered to be shareholder-friendly is when companies require their managers to have a stake in the company. In many cases, they will set forth a policy that requires upper-level executives and certain managers to own stock in the company. This stock is generally a substantial portion of their benefits and is worth more than their salary. By requiring this, companies can ensure that the executives of the company act as if they are owners instead of simply employees. This gives the managers significant added incentive to always try to make decisions that are best for the company.

Dividend Policy

Shareholder-friendly companies also have clear dividend policies. Companies that outline all of the rules surrounding dividends are generally looked upon favorably by investors. Investors like to know where the excess profits of a company are going and how much they can expect on an ongoing basis in the way of dividends. Many investors rely on dividends as a significant source of income, and they want to know that this portion of their portfolios is taken care of.

Loyal Board Of Directors

When you invest in a company, it is also nice to know that you have a loyal board of directors in charge. The board of directors has to know that keeping the shareholders happy is their number one priority. In some cases, the board of directors will be loyal to the upper-level executives and management of the company instead of the shareholders. This can cause a conflict of interest and upset the shareholders. Their primary objective should be to increase the value of the stock and pay out regular dividends.

Fair Voting Rights

Another sign of shareholder-friendly management is that the voting rights of the company are set up to be fair. For example, if you have a situation in which each share receives one vote, it will be completely fair. Some companies make it so that upper-level executives have much more voting power in the company even though they own only a small percentage of the company stock.

Reasonable Executive Benefits 

Companies should also strive to provide their executives with reasonable compensation and benefits. As an investor, you do not want to see a large percentage of company profits going to the executives of a company. While you want them to be fairly compensated, some of the companies out there provide an excess of benefits for their CEOs and other upper-level executives. A company that values shareholders will instead use much of that money to fund dividends for the shareholders. The select few executives should not be rewarded that much more than the investors in the company.

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