Look for Shareholder Friendly Management

Benjamin Franklin said that if you were to persuade a man, appeal to his interest rather than his reason. Investors are likely to get much better results from managers who have their own capital tied up in the business alongside the outside minority investors.

I've long been a fan of ownership guidelines at companies such as U.S. Bank that require executives to keep a certain multiple of their base salary invested in the common stock (the best part? Stock options don't count!) Likewise, management's affirmation that 80% of capital will be returned to the owners each year in the form of cash dividends and share repurchases and their constant ability to maintain one of the best efficiency ratios in the industry (a key measure for banks - calculated by looking at non-interest expense as a percentage of total revenue) shows that they really do understand they work for the stockholders.

Compare that to the Sovereign Bank debacle that was on the front page of the Wall Street Journal where that company's Board of Directors and management attempted to utilize a loophole in the New York Stock Exchange rules to permit it to merge with another company without giving the shareholders the opportunity to vote on the consolidation.

For more information, read 7 Signs of a Shareholder Friendly Management