H, My point is this - when a director has a substantial...

H,

My point is this - when a director has a substantial ownership position relative to his or her own net worth / financial circumstances it creates a strong incentive to think like a fellow shareholder or business owner.

Personally, I always think like this because I've been investing for so long but most people don't. Often directors come from management in larger companies or businesses so they think in those terms - this can involve a whole lot about process, systems controls, advisers opinions and the like.

The fundamental question is "is the board and management firstly serving the owners (shareholders) interests?".

It is easy to get caught up with the fact that a director has a whole lot of other issues to consider such as employee entitlements and safety, environmental obligations, government regulation, continuous disclosure, accounting rules, general corporate governance etc etc. Of course sitting over the top is personal reputation. So when you look at all the material and issues and distractions it is very easy for a director to miss that the very first thing that should colour all decision making which is "is this in the best interests for the owners? does it reduce risk whilst optimising returns?"

Running a good business, following the rules and ensuring a safe, non-polluting, community conscious business usually does maximise returns and most of these things are not really optional anyway, but it easy for a board to spend a lot of time contemplating issues and factors that do not directly create value and then when the most important strategic issues come up which relate directly to value, defer to an adviser.

Examples of these kind of decisions are: hedging policies, raising equity or debt, acquisitions, making policies on dividends or capital returns, deciding to sell the business to someone.........

My point is that when you have money involved yourself, it helps to focus a director on those key issues and not get overly distracted by multitude of other things that take up mind space.

Some people argue directors independence is compromised by a significant shareholding, I disagree strongly, because I believe directors should be focussed always on the interests of owners.

In the case of RED, no director has a material holding relative to their directors fees. I would like to see this change.