Allocation of capital

Wookster

Generali wrote: »

You'd hope that a company raising money would do so in order to make more money. I realise that most large companies are run to enrich directors rather than the owners but I live in hope.

Here in lies the rub - I'd wager that most companies doing rights issues do it because they need further financing due to running low on cash rather than expansion plans. This tends to be different for small cap & private companies which will normally use private equity/ VC finance as banks seem to have pretty much closed their orifices to business finance.

Thrugelmir wrote: »

Another era that I feel has passed. As boards become more accountable to shareholders for performance. The availability of cheap debt to finance acquisitions is diminishing. So measurement of operational performance will come to the fore. Something that private equity investors are waking up to. No longer will boards be dominated by financiers rather than experts in the Company's given field.

This is so true, especially regarding banks and multinational corporations. I think there is a dam building for change in finance leadership across a wide range of PE backed businesses at the moment. As to the multinationals and banks? Investor apathy is truly truly disgusting. Remember ladies and gents, this is YOUR pension fund that's being scr@w@d over.

Thrugelmir

Wookster wrote: »

As to the multinationals and banks? Investor apathy is truly truly disgusting. Remember ladies and gents, this is YOUR pension fund that's being scr@w@d over.

There's more pressure on Company boards than you may realise.

Witness the revolt in May by shareholders at bookmaker William Hill, where one third either opposed pay awards to directors or withheld their vote. Or at easyJet, communications group WPP, games retailer Game Group, Lloyds, and Barclays, which also found themselves in hot water with investors.

And this isn't just about pay and bonuses. If the knives are out for chief executives, they're being sharpened for chairmen and non-executive directors, too. Dismayed at how large companies and their smaller, listed counterparts are being run and rewarded, the level of dissent among investors is rising. Whether that's refusing to back remuneration or re-election, or whether it's based on wider corporate governance issues such as director independence, or social issues – including the environment or country politics – they're flexing their muscles and making themselves heard.

We've seen Prudential chairman Harvey McGrath battling to retain his position after a sizeable minority of shareholders voted against his reappointment. Apple was on the back foot after nervous shareholders demanded that the company outline its succession plan, following chief executive Steve Jobs's illness. A hedge fund investor, Julian Treger, led a shareholder revolt at AIM-listed Sylvania Platinum, calling for the sale or break-up of the business. And Pirc, a research and advisory consultancy which provides services to institutional investors on corporate governance and corporate social responsibility, advised stakeholders to vote against the re-election of all six non-executive directors at Mitchells & Butlers, the pubs and restaurants group, claiming they lacked independence.

http://www.director.co.uk/MAGAZINE/2011/7_July_Aug/governance_64_11.html

Wookster

Thrugelmir wrote: »

There's more pressure on Company boards than you may realise.

This is SO long overdue.

There really needs to be a sea change in attitude here.

IronWolf

One of the criteria for me investing in a company is that the board are both competant, and return value to shareholders. Most will try and get as much salary as they can, who wouldn't, but things like increasing dividends, share buybacks, having large holdings themselves, not issuing loads of options diluting everyone else show that they do care about shareholders.

Mr_Mumble

Loughton_Monkey wrote: »

OK, I'm no expert, but will bow to better informed people. But I don't fully understand. Surely 'most' publicly traded equity (measured by No. of Shares and Value)

By value, yes, but there are far more companies in the small cap and AIM than in the FTSE 350. James Latham is a favourite of thefool and there were only four trades yesterday. I bought some shares of an investment trust last week with a market-cap of over £1 billion and there'd only been a couple of trades (according to the LSE website) before 9:30am.

Even for the humungous blue chips the more liquidity the better. Advances in high frequency trading and all sorts of exotic ETFs require a lot of liquidity. Take a look at part of the reason for last year's flash crash:

"Automatic computerized traders on the stock market shut down as they detected the sharp rise in buying and selling." As computerized high frequency traders exited the stock market, the resulting lack of liquidity "...caused shares of some prominent companies like Procter & Gamble and Accenture to trade down as low as a penny or as high as $100,000."