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Bet on Belief: Why Founder and C-Suite Ownership Matters

Updated: Jan 6

Disclaimer: This communication is provided for information purposes only and is not intended as a recommendation or a solicitation to buy, sell or hold any investment product. Readers are solely responsible for their own investment decisions.


 

Invest in Companies Where the Founders and C-Suite Eat Their Own Cooking


In the world of investing, there's a saying that goes, "If you want to eat well, invest in companies where the chefs eat their own food." This metaphor refers to the importance of founder and C-suite ownership in a company.


When the people who make the decisions have a significant stake in the company's success, it aligns their interests with those of shareholders. This can lead to better decision-making, a more committed workforce, and ultimately, higher returns for investors.


Warren Buffett, Chariman & CEO of Berkshire Hathaway has been owning a significant stake of his company since the last 20 years.
Warren Buffett, Chariman & CEO of Berkshire Hathaway has been owning a significant stake of his company since the last 20 years.

Advantages of High Share Ownership for Co-Founders/C-Suite Execs:

  • Alignment of interests:  When execs hold a significant amount of shares, their financial success becomes directly tied to the company's performance. This incentivizes them to make decisions that prioritize long-term growth and profitability, as it benefits both the company and their personal wealth.

  • Skin in the game:  High share ownership increases commitment and dedication. Knowing their personal fortune is on the line can motivate execs to work harder, take calculated risks, and make sacrifices for the company's success.

  • Credibility with investors and employees:  Investors appreciate a vested interest in the company's success, as it demonstrates confidence in the company's prospects and a commitment to seeing it through. Similarly, employees may be more motivated to work for a company where the leaders have a significant financial stake.

  • Decision-making autonomy:  Owning a majority of shares can give co-founders or C-suite execs greater control over the company's direction, allowing them to pursue their vision without needing constant approval from external stakeholders.

  • Potentially superior returns:  Studies have shown that companies with high founder ownership tend to outperform the market over the long term. This is likely due to the factors mentioned above, such as alignment of interests, increased commitment, and better decision-making.


How to Check Ownership Figures:

There are a few ways to check the ownership figures for a company's founders and C-suite executives.

You can find this information on financial websites like Simply Wall St. (https://simplywall.st/)


Or you can look at the company's proxy statement, which is filed with the Securities and Exchange Commission (SEC).



Examples of Companies with High Founder Ownership:


These companies (except for Airbnb & Duolingo, since they are both relatively new in the market) have had impressive long-term performance, which is likely due in part to the strong alignment of interests between management and shareholders.



Conclusion:

Investing in companies with high founder and C-suite ownership is a strategy that can help you achieve your long-term investment goals.

By aligning your interests with those of the people who are running the company, you can increase your chances of success.

I hope this helps! Please let me know if you have any other questions.



 

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