How to tell if management will reward shareholders
The extravagance of any corporate office is directly proportional to management’s reluctance to reward the shareholders. Peter Lynch
Director’s and management’s salary packages are inversely proportional to their willingness to reward shareholders.
Those wasting shareholder money on remuneration consultants don’t deserve your trust. Hiring remuneration consultants is managements way of telling you they want more of your money than they deserve. It indicates management are profligate and will waste your money on non-profitable activities, such as those consultants.
Unfortunately Nearmap Limited (ASX:NEA) have gone one step further and are wasting even more money. Nearmap are holding a special general meeting for shareholders to approve two option grants valued at over $200,000 each. The two directors are new and are on already on $70,000 annual packages.
The two directors, Ian Morris and Peter James, don’t even have any of their own skin in the game. Neither has invested one cent in Nearmap.
The cost of these options grants includes:
- the time/opportunity cost the directors should have spent improving the fortunes of the company instead of figuring out how to enrich each other
- the cost of the remuneration consultant
- the costs of the general meeting, including documentation, director’s and management’s time, cost of venue and associated costs
- the value of the options $434,000
The directors and management of Nearmap should concentrate on improving the business and spend less time wasting valuable shareholder funds and enriching themselves.
