incentives
Act like an owner
The rule
Buying shares makes you a part-owner. Take part, vote, and hold weak or greedy management to account instead of sitting quiet.
Where it flips
But getting involved can turn into meddling that distracts a good management. The fix is to step in where the stewardship is truly failing, and let able, honest managers get on with the job.
Graham told shareholders to act like the owners they are. Read the reports. Vote your shares. Question the board. Push back on managements that pay themselves richly while serving owners poorly. Quiet, passive small shareholders are exactly why bad managements last. Owner-like involvement is the cure.
A worked example
A management keeps hoarding cash and handing itself options while returns lag. Owner-minded Aayra votes against the pay plan and backs shareholder motions, instead of shrugging and holding quietly. [illustrative]
How to spot it
- ·reports unread, votes not cast
- ·management answering to no owner
- ·self-dealing tolerated by quiet holders
Benjamin Graham · The Intelligent Investor