12 Signs of Great Leaders (And Why It Matters)
Companies run by great leaders make the best investments
The company management is a vital cog in every business. How well a company is run largely depends on its management. Even the best business can be destroyed by poor management.
It’s not always easy to assess a company’s management, without meeting them in person. Having said that, there are some telltale signs that can give us a clue.
1) Track Record of Outperformance
There’s a reason why winners keep on winning.
How has the business performed with this CEO?
Is revenue increasing?
Are margins increasing (or stable)?
Are there new product launches?
Is the moat of the company widening?
2) Great Communicator
Communication skills are key in business.
Do they explain their decisions?
Can they teach?
Do they use plain simple English, as opposed to technical jargon?
Do they have an investor presentation?
Do they have a shareholders letter?
3) Skin In The Game
If the leaders experience the same pain as you when the stock price goes down, there’s a good chance your invested in the right company.
Look at the proxy statement and recent insiders filings to find out.
4) High Employee Ratings
"If you want to know what a man’s like, take a good look at how he treats his inferiors, not his equals."
Where to look:
Glassdoor
Comparably
Glassdoor
5) Delivers Results
Great CEOs consistently beat Wall Street’s earnings estimates. They normally beat the guidance which they issue.
6) Mission-focused
The best leaders are laser focused on the company’s mission, more than profits. A good mission statement clearly explains the value proposition that the company offers, and the problem it is trying to solve.
7) Excellent Capital Allocator
The main role of a leader or CEO is to allocate capital to the best investment opportunities.
Do they get high returns on investment?
Do they pay a dividend?
Do they buyback stock?
Do they pay down debt when there is a chance to do so?
Do they make strategic acquisitions?
8) Own Up To Mistakes
Great leaders credit their teams for their success, and accept blame for their mistakes. Having the humility to admit their mistakes is a sign of great management.
9) Reasonable Compensation
Great leaders don’t enrich themselves at the expense of shareholders. They can be paid well (and deservedly so), but this should not be excessive.
10) Make Themselves Non-Essential
They make the business so easy to run that even an idiot can do it. They set up the company in a way that, if they are not around, any Tom, Dick or Harry can run it.
11) Focus On The Business, Not The Stock
Great leaders don’t base their decisions on whether the stock price goes up or down. Instead, they focus on whether the business is growing in the long term.
12) Finger On The Trigger
Great leaders always track movers and shakers in their industry. They are ready to pounce on any opportunity available to them.