Before You Buy That 'Cheap' Stock, Read the Proxy, Not The Pitch Deck

Jim Osman

Sun, Jul 6, 2025, 1:54 PM 6 min read

The deeper you dig into companies, the more dysfunction you find. This is not due to businesses being inherently broken, but rather because the incentives are flawed.

On the surface, stocks can look cheap. Screens flag low multiples, analyst notes highlight growth potential, and management sounds confident on the call. But beneath that narrative, capital often gets quietly misallocated. Empire-building creeps in. Decisions tilt toward boosting bonuses, not shareholder value. And the metrics that matter most, the ones buried in incentive structures and insider behavior, go ignored by most investors.

• As Amazon Doubles Down on Robotaxis, Is AMZN Stock a Buy?

• Why Citi Thinks Micron Stock Is Headed to $150 After Earnings Beat

• OpenAI’s Partnership With Microsoft is Good, Says CEO Sam Altman; There’s ‘Tension,’ But Already Planning ‘Next Decade Together’

• Markets move fast. Keep up by reading our FREE midday Barchart Brief newsletter for exclusive charts, analysis, and headlines.

This is where the true significance emerges.

If you don't monitor executive pay and insider moves, you're overlooking potential value leaks or, crucially, unlocked opportunities. These aren’t soft signals. They’re hard tells. The clues are in the proxy filings, the timing of stock sales, and the structure of performance hurdles.

This issue isn’t about corporate morality. It’s about money. For investors who know where to look, misaligned governance isn’t a red flag; it’s a roadmap to alpha.

Capital Allocation. The Hidden Cost Of Ego

Capital allocation is where the quiet destruction of value often begins and it’s rarely about incompetence. It’s about incentives.

Expect empire building when a CEO's bonus is based on top-line growth instead of return on invested capital (ROIC). That usually means overpaying for acquisitions, not because they’re strategic, but because they build legacy. Cash gets hoarded instead of returned, while buybacks and dividends are treated as afterthoughts, despite being the most shareholder-friendly tools available.

Look closer and you'll see companies issuing millions in stock-based compensation while continuing to dilute shareholders by printing more shares. Others hang onto underperforming divisions year after year, not because they add value but because breaking them up would shrink the C-suite.

This isn’t hypothetical. We’ve seen it in sprawling conglomerates that refuse to divest low-ROIC segments, in tech firms obsessed with topline over profit, and in boards that rubber-stamp comp plans designed to reward size not efficiency.