When portfolio managers take a position in a company’s shares, or even think about taking a position, it’s a highly analytical process. But interpersonal dynamics have an impact too. When a CEO makes an investor’s Spidey sense tingle, it can derail the investor’s interest. Here’s some ways I’ve seen CEOs get on the wrong side of an investor.
Outsized compensation. Despite prevailing sky-high compensation for CEOs, it still makes investors jumpy. Among S&P 500 companies, the CEO’s salary has less of an impact. But among small and mid-cap companies the impact is larger. When a CEO is making $5 million a year, the investor will register a risk that the CEO might be fat, happy and overly motivated to maintain the status quo.