Follow the leaders

Founder-led companies typically endure and they can help ensure investment portfolios do, too.

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Founder-led companies have historically outperformed — it’s been established many times over through both industry and academic research.

In perhaps one of the most notable examples, having observed that profitable growth was becoming more challenging for listed companies, while working at Bain and Company, Chris Zook and his team looked at all public companies across the globe and their performance over 25 years. It found the companies that were most successful at maintaining profitable growth over the long term were disproportionately those where the founder was still involved in the business in some way, shape or form, or where the founding principles were still practised. In some cases, they’re as much as three times more likely to generate superior long-term returns.

Ziller Funds Management founder and chief investment officer Joseph Ziller describes founder-led equities as “a very interesting pool to fish in” for global equities investors.

“What you get in a founder-led stock is leadership with: an owner’s mindset, frontline obsession and business insurgency,” Ziller says.

A fan of Zook’s work, Ziller notes an example often cited by Zook, being MS Oberoi, founder of Oberoi Hotels.

“He had a frontline obsession; well into his nineties, he would walk down to the customer suggestion box in the hotel lobby, take out the suggestions, hold them so close to his eyes that they touched his nose because he was almost blind, and then handwrite responses one-by-one to each of the guests’ queries,” Ziller recalls.

“There was a love of the customers and an obsession with service at the front line.”

These kinds of qualities create a unique operating culture that influences the workforce, the product, and the financials because of their overall impact on value proposition. As a result, the stock price benefits and returns grow.