Column AQ – Board Ownership

Cameron : Alright. So, column AQ asks if the CEO, or another board member, is a founder. It gets two for a yes, zero for a no. This, I believe, is because Warren Buffet has often said that he believes companies where the founder is either a CEO or still active on the board will often outperform other companies. Is that correct?

Tony : Correct. That’s right. There’s nothing like having skin in the game. It’s great if it’s a founder, but if someone else on the board has a very large shareholding, we’ll also score that too.

Cameron : Now on Stock Doctor, up in the menu, there there’s a little picture of a silhouetted person wearing a tie. That’s the corporate details tab. If you click on that, you’ll see the current directors and management, and then we’re looking at the percentage under ordinary securities, the percentage of the company that they own. Correct?

Tony : Correct.

Cameron : How big a percentage does it need to be to determine whether or not they’re a founder?

Tony : It’s a good question. I’ve gone as low as 5%. If I think that the person was a founder and they’d been diluted over time then I’ll go down to 5%, but probably around 10% is a good number because maybe the company has  grown a lot and the founder may well have had to sell down to achieve that growth.

Cameron : Right.

Tony : There are often requests from institutional investors for the founders to sell down to improve liquidity in the stock.

Cameron : Okay. So, again, they get a two for a yes, zero for a no.