Our long term interests align to a large extent, because the directors are shareholders just like us. However, there are a few things we should always be conscious of, particularly now (note: I'm not singling out OBJ here, as all companies have the same potential problems):
- Unlike shareholders, directors as controllers of the company are in the special position of being able to confer themselves financial benefits above and beyond what is conferred to shareholders as owners of the company. Such an ability is obviously tightly regulated by the corporations laws and ASX Listing Rules, but there is always a natural human inclination (greed) for directors to try to avoid the application of these rules where possible.
- There is a significant disparity between what directors know and what shareholders know about the current status and day to day operations of a company. While there are also laws that are designed to deal with this, there is a natural human inclination for the directors to use this to their advantage to maximize their own individual wealth (again, simple greed). Accordingly, they will be inclined to avoid the application of these rules where possible.
- In the peculiar case of a start-up company whose originators/creators are also the directors, there is an emotional investment and sense of "superior ownership" of the company that attaches. This particular psychology can be tested at a time where the company is about to undergo a dramatic transformation for the better - all their hard work is about to pay off. But then comes the realization other shareholders (not the "true" originators/creators of this wealth) appear to be getting a windfall from this transformation because the directors in this situation only legally own a small percentage of the company. What follows is "Director's Regret" (at listing the company and handing out shares to retail shareholders for a pittance in the first place) and "Director's Resentment" (at retail shareholders for their ownership of shares, their lack of physical/creative contribution to the company's success, and their constant sitting on the sidelines and criticizing).
And that, I think, is where we are at now. It's all pretty human.
OBJ Price at posting:
6.5¢ Sentiment: Buy Disclosure: Not Held
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