Posted in Finance, Accounting and Economics Terms, Total Reads: 53
Definition: Hands-On Investor
Hands-On Investor is an investor having a sufficient portion in the company to influence the management of the company or get himself involved in the decision making process of the company which are vital for the functioning of the company. They have interest in making the company a success or making changes which he feels suitable for the betterment of the company.
There might be a case when the investor has lost his faith in the present management or he might be interested in changing the management and its structure, at this point he can use his power of equity and can influence or change the management structure and either himself be a member or appoint someone to be in the management hierarchy.
This concept can sometimes cause chaos in the company as too many shareholders putting different opinions in front of the management and can cause huge disturbance in the functioning of the company. The situation may arise that the shareholders may not have any knowledge of that business but still they try to influence the management system which may lead to mismanagement in the company. But sometimes a good strategic model can rise from the opinions or views of a normal shareholder which can work for the benefit the company.
Financial advisors and even companies ask shareholders to actively participate in the process and share responsibility of the company for which they conduct annual board meetings where all shareholders are called upon and even voting is done for the selection of b board of directors and management structure.
This concept is totally an antonym of hands-off investor in which the investor in spite of having a huge stake in the company does not actively participate in its decision making and uses its stake just for profit and business purposes.