A Fine Line
Back in September, I published a post on how directors could prove to their investors that they were in it for them – the owners of the company – and not themselves, the temporary custodians. My answer was a rather empthatic one; the easiest way to make a director think like a shareholder is to make him a shareholder. Now he's not just motivated by his salary and bonus, but is incentivised to care about the share price - after all, it now directly affects his own income. Recently, though, that black and white answer has come up against a few questions; the latest of which was brought out by the investor disquiet at Elektron. I had posted a piece on Elektron on Monday - so congratulations to those of you who read it - but it has since disappeared into the ether of the internet. The first lesson for me today, then - back things up more regularly. Since it's a good example, though, I'll start with Elektron as I think about exactly what the implications are behind directors, share ownership, and incentivisation schemes.
As I mentioned in the now buried post, probably the best places to point to for the story behind Elektron's recent shareholder anger are the online message boards at ADVFN and iii. Elektron are a company who seem to be recovering operationally, with much improved profits last year. Glancing through the annual reports, I noted that the Chairman had a significant chunk of shares. Theoretically, this strong ownership should give shareholders some faith that the Chairman is in it for the long haul. One quote from the bulletin board stuck in my mind, though: (more…)