arl directors shareholdings

Yesterday's Sydney Morning Herald had an article about the relationship between company performance and the number of shares owned by directors. ARL shareholders might find it an interesting read as no ARL director owns any shares in ARL.

The relevant part of the article is below:

"Suncorp's surprise announcement last month that directors would need to own more than $200,000 of the company's stock is likely to spark a trend as new data reveals directors with ''skin in the game'' generally outperform - by a lot.

A new report by Macquarie Equities, Board Matters, found that companies that had directors holding stock had better shareholder returns and return on equity. Using a long-short back-test analysis, it found that return on equity was 13.7 percentage points higher and relative share price outperformance was 8 per cent.

It is a fascinating concept and if it gains traction could prompt investors to push for more boards to put their money where their mouths are and better align themselves. The percentage of ownership for the independent directors is less than 1 per cent, on average.

There has been a lot of discussion about executive pay, but as one corporate governance expert said: ''What about getting directors motivated to get out of bed in the morning?'' He makes a good point because boards are the guardians of shareholder interests. To this end they act on behalf of shareholders to supervise the company. This means having oversight of overall strategy, the use of capital, appointing the chief executive and signing off the financial accounts.

Suncorp has given directors four years to comply with its new policy, which involves directors being asked to buy a minimum number of shares that equate to their base director fees."


You can read the whole article here:
http://www.smh.com.au/business/report-finds-companies-with-directors-holding-stock-had-better-returns-20131125-2y63b.html