Skin In The Game

AAA

DEFINITION of 'Skin In The Game'

A term coined by renowned investor Warren Buffett referring to a situation in which high-ranking insiders use their own money to buy stock in the company they are running.

INVESTOPEDIA EXPLAINS 'Skin In The Game'

The idea behind creating this situation is to ensure that corporations are managed by like-minded individuals who share a stake in the company. Executives can talk all they want, but the best vote of confidence is putting one's own money on the line just like outside investors!

RELATED TERMS
  1. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  2. Oracle Of Omaha

    A nickname for Warren Buffett, who is arguably one of the greatest ...
  3. Insider

    A director or senior officer of a company, as well as any person ...
  4. Mobile First Strategy

    Mobile first strategy is trend in website development where designing ...
  5. Occupational Safety And Health ...

    Law passed in 1970 to encourage safer workplace conditions in ...
  6. Administrative Order On Consent ...

    An agreement between an individual or business and a regulatory ...
RELATED FAQS
  1. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  2. Why would a value investor consider the Internet sector?

    Value investors may find significant opportunity in the Internet and tech sectors. The greatest value investor of them all, ... Read Full Answer >>
  3. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  4. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
  5. Why are stock buybacks so controversial?

    A stock buyback describes a situation in which a company repurchases shares of its own stock from the marketplace. Similar ... Read Full Answer >>
  6. Why does Berkshire Hathaway prefer to buy back shares instead of paying dividends?

    Methods by which companies reward shareholders with cash include paying dividends and buying back stock. One of the most ... Read Full Answer >>
Related Articles
  1. Active Trading

    Warren Buffett: How He Does It

    We look at the Sage of Omaha's methodology for evaluating value stocks.
  2. Entrepreneurship

    The Greatest Investors

    Read about the achievements of those who have mastered the art of investing.
  3. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  4. Investing Basics

    Manage Investments And Modern Portfolio Theory

    Modern Portfolio Theory suggests a static allocation which could be detrimental in declining markets, making it necessary for continuous risk assessment. Downside risk protection may not be the ...
  5. Economics

    Understanding Economic Order Quantity

    Economic order quantity is an inventory-related equation that determines the optimum order quantity that a company should hold in its inventory.
  6. Economics

    What is Net Margin?

    The ratio of net profits to revenues for a company that shows how much of each dollar earned by the company is translated into profits.
  7. Investing Basics

    What is a Stock Option?

    An employee stock option is a right given to an employee to buy a certain number of company stock shares at a certain time and price in the future.
  8. Investing

    What Education Do You Need To Become A Billionaire?

    What kind of education does it take to become a billionaire? We take a look at the formal and informal education of the world's five richest people.
  9. Economics

    Understanding Marginal Cost of Production

    Marginal cost of production is an economics term that refers to the change in production costs resulting from producing one more unit.
  10. Investing

    Wizards Of Odd: A Trip To Tech Land

    I spent a couple of days in Silicon Valley, and here are some key lessons I learned after meeting with a number of tech CEOs and venture capitalist.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center