Would you trust a pilot who refused to fly on the plane they just signed off as safe?
The same principle applies to company directors and board members. If they are guiding strategy, approving risk, and signing off on investments, why should investors trust them if they aren't personally invested?
In private markets and financial services, where credibility, accountability, and alignment are everything, having true skin in the game is not optional. It is a hallmark of strong governance and long-term value creation.
The Case for Director Investment
Alignment of Interests
Eric Jackson of EMJ Capital has argued that boards are strongest when directors commit their own capital. McKinsey & Company's governance research shows that companies where directors own meaningful stakes outperform peers by up to 30% in total shareholder return over a decade.
When directors invest their own money, not just options or RSUs, they stand shoulder-to-shoulder with shareholders. Their incentives are fully aligned: long-term value creation, not short-term optics.
Investor Confidence
Private investors and institutions increasingly assess not only management but also board composition before allocating capital.
Goldman Sachs famously required its partners to invest substantial portions of personal wealth, ensuring every decision carried weight.
In the UK, the Corporate Governance Code emphasises that directors should promote the company's long-term sustainable success, an obligation best fulfilled when they share in both risk and reward.
A board that invests demonstrates conviction, resilience, and integrity, qualities investors trust.
Beyond Symbolism
Token purchases are not enough. A director buying a handful of shares for appearances does little to instil confidence. True best practice sets ownership guidelines:
- Minimum equity holdings relative to director fees or net worth.
- Requirements for directors to acquire shares within 12–24 months of joining.
- Policies encouraging reinvestment of board fees into equity.
The goal: a level of commitment that is material and enduring.
Better Decision-Making
Directors with capital at risk scrutinise strategy more deeply, challenge management more rigorously, and resist complacency. They ask the hard questions because the answers affect their own wealth as much as anyone else's.
As Jackson notes, "Nothing sharpens a director's focus like knowing their own capital is on the line."
Culture and Accountability
Skin in the game transforms boardroom culture:
- It shifts discussions from abstract governance to lived accountability.
- It reinforces fiduciary responsibility with directors as not just gatekeepers but stakeholders.
- It cascades through the organisation, promoting ownership at every level.
RSUs and Options Are Not Enough
Options and restricted stock units are compensation, not commitment. They reward tenure, not conviction.
True alignment comes only when directors willingly put capital at risk. One is incentive. The other is integrity.
The Impact on Risk and Long-Term Value
Financial services businesses in particular carry heightened fiduciary responsibilities. With balance sheets leveraged to client assets, regulatory oversight, and systemic importance, accountability cannot be symbolic.
When board members invest, they demonstrate that they are not just overseeing risk—they are sharing in it. This creates:
- Stronger stewardship of capital.
- Greater resilience under pressure.
- Credibility with investors, regulators, and stakeholders.
Conclusion: Stewardship Through Commitment
Whilst boards are advisory committees they are also stewards of capital, strategy, and culture. The best boards worldwide, from Goldman Sachs partners to private equity general partners who commit 1–5% of every fund—require skin in the game. Investors notice, regulators encourage it and long-term results prove it.
For any financial services firm, ensuring that directors are personally invested is not only best practice but a competitive advantage.
Because at the end of the day, if a director won't risk their own money, why should anyone else?
Sustainable Wealth Group helps secure strong, value-driven non-executive directors for the ethical and sustainable companies we fundraise for. Those with the conviction to become a true steward, we invite you to explore our open Investor Non-Executive Director roles.
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