Morning, it's Jack here.

Humans are funny aren’t they? I was reading last night about how ex-McDonald’s CEO Steve Easterbrook is being sued over alleged workplace relationships. It got me thinking about corporate governance. Even the biggest and most polished companies can get caught up in human mischief.

For years I paid lip service to corporate governance but it took a while to cotton on to its true importance. One day I made an investment in a small cap with an inexperienced and small corporate team. Communication with shareholders was non-existent and RNS statements were unreliable. Pretty quickly I began to worry that my investment might be misplaced - in time those fears were justified. Lesson learned.

It’s one of those hard to screen for, qualitative aspects of investment, but it is a very real consideration. Not all companies are focused on shareholder value.

Some companies that do seem genuinely concerned with this point include Games Workshop and Judges Scientific. There are more but those are the two that immediately spring to mind.

Some of the things I’ve started to look out for in spotting that type of company include:

  • Founder-owners or long term management with significant shareholdings,
  • Cash-generative companies with strong balance sheets,
  • Management commentary that is considered and distinctive (too many statements feel phoned in or boilerplate), and
  • A lack of equity dilution over time.

These help but they’re not foolproof. Given that it’s hard to screen for, I’m curious to hear any other suggestions of companies with good shareholder alignment. And what do you look for to identify those companies? Anyway, nearly 7am.

Zotefoams (LON:ZTF)

Share price: 357p (before market opens)

No. shares: 49m

Market cap: £173.58m

Zotefoams (LON:ZTF) is a foam and insulation specialist. It was highly rated in the past but shares have come off a little:


I’m not familiar with the story here. My guess is this is due to some missed growth targets and a lack of cash generation.


If you head over to the group’s cash flow statement you can see it has had to raise debt and equity in the past two years.


Note the dividend payments too. I’m not a fan of companies that insist on paying dividends while funding operations externally, but ZTF…

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