Ultimate Alignment

If you are an entrepreneur who just started out to forge your own business from the very ground up, how would you pay yourself?

Or how can you pay yourself?

Simply, “I would only eat if my business makes any money”

That will be the reality of starting any business. And it seems clear and plain simple to understand. There could not have been another way.

However, applying this to the majority of listed companies which we see everyday, how many companies are paying their management fees that doesn’t seem to tie in with the earnings of the company? It is more than common to see fees to the management holding strong even when business was bad. Sometimes, management fees even went up when business did not, worse, when business was bad.

Perhaps that is why founder led businesses always have a special place in our hearts. (Although not all founder led businesses are of equal quality)

What if, then, you found companies which the founder takes $0 in salary? And their only remuneration is through dividends paid at a reasonable payout rate? What does this tells you about the management when such founder chose to adopt this way of remuneration?

More importantly, can investors trust such management better than others? Does it show that the management is willing to rise and fall with the business, take full responsibility and ultimately align their interest voluntarily with that of the company (and eventual shareholders)?

What if, you realise that this founder has been doing this for the past 20+ years and has been consistently out performing the industry and peers, quietly doing what they do and has now became the number 1 global player in its field?

Would you be keen on having the chance to partner with this founder? To be involved in their entrepreneurship journey for another 20 years and beyond?

 

Thank you for reading