David Kass – Don’t Invest in a Company Unless the CEO Owns a Large Stake

<p><strong>BIO: </strong>Dr. David Kass received his Ph.D. in Business Economics from Harvard University and has published articles in corporate finance, industrial organization, and health economics. He currently teaches Advanced Financial Management.</p><p><strong>STORY:</strong> In his early 20s, David invested $2,000 in a company giving out high dividends. Only after he invested did he realize that none of the senior executives in the company owned its shares. Soon enough, the stock went down to zero due to accounting fraud.</p><p><strong>LEARNING:</strong> Only invest in a company if senior executives, especially the CEO, own a significant stake. The value of the CEO’s stock in his own company to his annual salary should be at least 3:1.</p><p>&nbsp;</p><blockquote class="ql-align-center"><strong>“Look carefully at proxy statements and make sure the CEO and other senior managers have skin in the game, that their interests are likely aligned with yours and have a large stake through their stock holdings.”</strong></blockquote><blockquote class="ql-align-center">Dr. David Kass</blockquote><p>&nbsp;</p><h2>Guest profile</h2><p><a href="https://www.linkedin.com/in/david-kass-b7240713/" rel="noopener noreferrer" target="_blank"><strong>Dr. David Kass</strong></a> received his Ph.D. in Business Economics from Harvard University and has published articles in corporate finance, industrial organization, and health economics. He currently teaches Advanced Financial Management.</p><p>Before joining the Smith School faculty in 2004, he held senior positions with the Federal Government (Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis).</p><p>Dr. Kass has recently appeared on Bloomberg TV, CNBC, PBS Nightly Business Report, Maryland Public Television, Business News Network TV (Canada), FOX TV, Bloomberg Radio, Wharton Business Radio, KCBS Radio, American Public Media’s Marketplace Radio, and WYPR Radio (Baltimore), and has been quoted on numerous occasions by