- \n
- Vision and plan:<\/span> <\/strong>Does the Management share a vision that appeals to you and has a plan to implement it?<\/li>\n
- Compensation of Top Managemen<\/strong>t:<\/span> Is the compensation they pay themselves reasonable enough? If the Management is paying obscene amounts of money to themselves, even when the company\u2019s profits suffer, it is better to stay away.<\/li>\n
- Decreased interest in the company<\/strong>:<\/span> Is the Promoters\u2019 interest in the company decreasing? For this, check whether \u2013\n
- \n
- The Promoters are reducing their stake-holding often.<\/li>\n
- The CEO and Top Management are selling\/exercising their stock options periodically.<\/li>\n
- The Promoters are pledging their shares.
\nIf the answer to any of the above (1, 2 or 3) is yes, then obviously the Promoters have a short-term interest in their company. Hence, it is better to stay away from it.<\/li>\n<\/ol>\n<\/li>\n<\/ul>\n- \n
- Buy-Back of shares:<\/span> <\/strong>If the company buys back<\/a> its shares at a time when the market is undervaluing its stock price, it usually is a reflection of its Management\u2019s confidence in the growth of the company.<\/li>\n<\/ul>\n
- \n
- Qualified:<\/span> <\/strong>Is the CEO is qualified to run the company? Does s\/he understand the business well enough to run it well?<\/em><\/em><\/li>\n
- Transparent:<\/span> <\/strong>Is the Management upfront about the actual threats and concerns the company is facing? Does the Management sometimes accept that it made a mistake? Management can make mistakes, and trustworthy Management admits them.<\/em><\/em><\/li>\n
- Pays dividend in case it is unable to increase the company\u2019s ROE further:<\/span> <\/strong>Logically, the company\u2019s net profit should be distributed among shareholders as dividends. But, generally, the company retains a part or the entire profit and re-invests it. What does good Management prefer: paying dividends or retaining the profit? Good Management retains a part\/entire profit, only when it is able to earn a handsome return on it; otherwise, it pays dividends.<\/li>\n<\/ol>\n
To get answers to the above questions, look at a company\u2019s Annual Report,<\/span> <\/strong>especially the Directors’ Report, Chairman\u2019s speech & Management Discussion and Analysis.<\/p>\n
A good benchmark for Trustworthy Management is<\/span> <\/strong>Bajaj Auto<\/a>. Rajiv Bajaj<\/a> (Managing Director of Bajaj Auto) has an acute business sense. The Management of Bajaj Auto has been prudent in its operations, and you will find them being very candid about the threats and concerns in Management interviews\/news items\/Annual reports. They also disclose the Management remuneration in their Annual Report.<\/p>\n
In a nutshell, you are looking for a leader who lives and breathes his\/her company, someone you can trust your hard-earned income with!<\/p>\n
Read Also:<\/strong> What is the Right Price of a stock? How do you asses the Intrinsic Value of a stock?<\/a><\/span><\/p>\n
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*Disclaimer:<\/strong> The securities quoted are for illustration only and are not recommendatory<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"
Having an excellent financial track record and a sustainable competitive advantage are 2 important characteristics to shortlist a wonderful company. But, one more characteristic is required to guarantee a future winner and that is a trustworthy management. You need to understand whether the company\u2019s management is someone who will protect your (investors) interests and is someone you can trust your money with.
\nSo what are the signs\/clues for you, as an investor to check whether the management is trustworthy and respects the interests of the shareholders?<\/p>\n","protected":false},"author":17,"featured_media":17929,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[1152,1179,1151],"tags":[81,1468,1142],"modified_by":"MoneyWorks4me","_links":{"self":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/1770"}],"collection":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/comments?post=1770"}],"version-history":[{"count":4,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/1770\/revisions"}],"predecessor-version":[{"id":22209,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/1770\/revisions\/22209"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/media\/17929"}],"wp:attachment":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/media?parent=1770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/categories?post=1770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/tags?post=1770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}} - Transparent:<\/span> <\/strong>Is the Management upfront about the actual threats and concerns the company is facing? Does the Management sometimes accept that it made a mistake? Management can make mistakes, and trustworthy Management admits them.<\/em><\/em><\/li>\n
- Qualified:<\/span> <\/strong>Is the CEO is qualified to run the company? Does s\/he understand the business well enough to run it well?<\/em><\/em><\/li>\n
- Buy-Back of shares:<\/span> <\/strong>If the company buys back<\/a> its shares at a time when the market is undervaluing its stock price, it usually is a reflection of its Management\u2019s confidence in the growth of the company.<\/li>\n<\/ul>\n
- Compensation of Top Managemen<\/strong>t:<\/span> Is the compensation they pay themselves reasonable enough? If the Management is paying obscene amounts of money to themselves, even when the company\u2019s profits suffer, it is better to stay away.<\/li>\n