Directors' dealings

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5. Who knows best?

A company's board will normally include Executive Directors, who run the company day-to-day, and Non-executive Directors who come in a variety of guises and may only be obliged to attend the odd meeting once a month.

The position a director holds, and his 'proximity to the action', is relevant when it comes to assessing the significance of his share dealings.

• Generally, dealings by the Executive Chairmen and Chief Executives of a company are the most significant as they are (or should be) fully aware of the company's trading situation and are in the best position to judge its prospects.
• Dealings by Finance Directors are also very important as they control the purse strings and are the first to learn of factors which will materially affect the company's finances.
• Dealings by Non-executive Directors, who don't always have access to the latest information and may just be employed on a consultancy basis, are usually not as significant, thought there are exceptions to this rule. If they are founding members of the company or have been directors for a long time, they may be very well informed of the issues facing the company. Equally, if they have particular experience of the industry or sector which the company is in, their share buying or selling is more significant.

1. What are directors' dealings? 2. Distinction from insider dealing 3. Two premises and a fallacy 4. Size of transaction 5. Who knows best? 6. Safety in numbers 7. Dealings in the context of recent share price 8. The closed period 9. Follow the leader 10. Sales can sometimes be a good sign 11. Playing the percentages 12. Other factors 13. Conclusion

• Beyond the Zulu Principle