Insider Ownership Analysis – Are the Interests of Management and the Common Shareholders Aligned

Insider Ownership Analysis - Are the Interests of Management and the Common Shareholders Aligned

In this article on insider ownership analysis, I discuss the importance of evaluating the minimum and maximum share ownership percentage held by corporate insiders in a company. While determining an appropriate percentage of stock ownership is not an exact science, I believe it is a crucial step in my overall stock investment analysis.

Company Ownership Evaluation of Corporate Insiders

I believe it’s important for corporate insiders to have a certain minimum percentage of share ownership to align their interests with those of the common shareholders. This ensures that they are more devoted to achieving success as their own money is at stake. However, it is also important to limit their influence, so I have set the maximum share ownership percentage of corporate insiders at 35%.

Since the percentage of stock ownership in companies with a larger market cap may be smaller than those with a smaller market cap, I have established the minimum and maximum share ownership percentages for corporate insiders as shown in the table below:

Market cap Minimum Share Ownership Percentage Maximum Share Ownership Percentage
< 100 Million 5.0% 35%
100 -1,000 Million 2.5% 35%
> 1 Billion 1.0% 35%

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