Jonathan Ponder, Vice-President, MSCI Research & Development
Companies whose directors – particularly independent directors – hold meaningful and growing equity stakes tend to perform better over time, a new report from the MSCI Institute and FCLTGlobal finds.
A sustained 5% average annual increase in independent director equity ownership over five years is associated with 35 to 40 percentage points higher cumulative total shareholder return. It is also linked to roughly 3% higher aggregate investment in research and development.
The effect is consistent across risk-adjusted returns, volatility and long-term investment behavior, according to our analysis, which examines more than 2,100 listed companies globally over the five years ended Nov. 4, 2025.[1]
At the same time, director equity ownership is declining across public markets. Independent directors have held only a fraction of the equity that executives have, with their stake shrinking to just 0.2% over the study period.
Among the findings:
- At companies where independent directors held more equity than executives over the period analyzed, volatility was on average 51% lower.
- Aggregating equity holdings to the company level, the median across all companies was approximately USD 930,000 for independent directors and USD 11.2 million for executives. Roughly 20% of companies had zero director equity ownership over the period analysed.
- 94% of companies analyzed lack a formal policy on director equity ownership, even though companies with such policies showed meaningfully higher and more durable ownership levels.
- Ownership trajectories appear to matter as much as levels. At companies where independent director holdings declined, total shareholder return fell by an average of 9.7 percent.
For boards and investors, the more pressing question may be whether their own structures, such as holding periods, independence requirements and voting guidelines, reinforce or undermine the long-term outcomes they seek.
The findings suggest boards and investors may need to monitor director ownership trajectories actively, not just set a threshold and move on. That so few companies have formal ownership policies, despite the evidence, points to a broader misalignment between governance norms, incentive design and long-term intent.
Average company outperformance with increasing director equity holdings (5-year total shareholder return)
Data as of November 4, 2025, based on a universe of 2,137 companies that were continuous constituents of the MSCI ACWI Index between 2020 and 2025. Outperformance factor was approximately 4.1% and 7.6% per 1% average annual increase in holdings for non-executive and independent directors, respectively. Holdings growth chart capped by the maximum 5-year average growth value observed for independent directors (4.38%). Correlation does not imply causation. Source: MSCI Sustainability & Climate Research, FactSet.
Proportion of shares held by directors and executives
Data as of November 4, 2025. Includes holdings of non-executive directors, independent directors and named executive officers of 2,137 continuous constituents of the MSCI ACWI Index from 2020-2025. Source: MSCI Sustainability & Climate Research.
[1] Listed companies represented by the MSCI ACWI, which captures large and mid-cap representation across 23 developed markets and 24 emerging markets countries. With 2,515 constituents, the index covers approximately 85% of the global investable equity opportunity set, as of March 31, 2026.
