Ever wondered why there is so much importance given to shareholders? Well, if you are not aware, Shareholders are the owners of any company that is open to public trade. They are like the multiple investors who put in money into a piggy bank, which can be considered as the company. When investing in any company, one of the main criterion should be to look for a shareholder friendly management so that it is a win-win for both parties. Here are five important signs that will help you in choosing such a management:
A Competitive Salary Package for Executives
The salary package of executives should be heavy immaterial of the performance of the stocks or there has to be a fair compensation which will include incentives when the stocks are performing. The latter would be a better bet so that even the executives are also stockholders and hence the insider ownership is also taken care of! The company will also treat corporate money like shareholder money, with as much precaution, ultimately benefitting the shareholder.
Transparent with Shareholders
A company that communicates only things that a shareholder will be happy to hear cannot be considered as one with a friendly management. The term ‘friendly’ literally implies that they be like a friend, transparency is highly critical! When the company is transparent with the shareholders, sends them open and frank communications at regular intervals about the happenings, then it is one in which you can secure your investment.
Proper Fund Management
Any company that is able to do the allocation of capital in a wise way and is able to pay-up the dividends on time to all the stakeholders is a company that is trustworthy. It should also be using a financial metric that is flexible and also considers all the current happenings in the specific industry.
Repurchase of Shares
Repurchase of shares by a company is the purchase of its own stocks from the open market. A company that repurchases their shares does so in the intention of reducing the number of outstanding shares in the market and is an indication that its performance is good.
The pricing of the shares is also an essential component in deciding if the company isreliable. The price has to be at its optimum level, not too high or too low. There is a wide belief that a fair priced company will also be fair to its shareholders, so look-out for this sign!
The company that you choose should also be a business that you completely understand and one that has a resilient competitive advantage. The trust factor is usually high in a company that has a loads of integrity as well as the best talent. The idyllic shareholder friendly company will be one which sees the investor as partner rather than just someone who is adding in some extra money into the system. In reality, what we need is a friendly and supportive management that will understand and appreciate the role of a shareholder. Identify your ideal management and start investing!