Shareholders concerned by director dealings Eyebrows were raised in December when the finance and managing directors of Michael Page, the global recruitment company, sold more than £2m worth of shares just weeks ahead of a profit warning that sent the company's shares plummeting. When asked about the timing of the share sales, Michael Page refused to comment, on the grounds that management personnel did not need to justify their actions. But shareholders watch directors dealings closely, taking their actions as a cue of how well a company may or may not be doing, and a "no comment" from management may exacerbate a potentially minor situation. News of the Michael Page directors" dealings sent the share price down 3 per cent on the day, and 6 per cent by the end of the week. "To investors it [director share disposals] is a reflection that the company is overvalued and that the share price is going to go down, or even more seriously that there is a bigger problem," Brian Peart, chairman of the north-east region of the UK Shareholders" Association, says. In the UK there are rules concerning when directors can buy and sell shares of their company, covering closed periods before earnings and trading updates. Profit warnings, however, do not fall under closed periods, raising the question of whether investors deserve to know more about the nature of director dealings before surprise announcements. On November 17 and 18, Stephen Puckett, finance director, and his wife Amanda sold more than 594,000 shares at prices between 376p and 380p. They generated more than £2.25m from the transactions. On November 15 and 16, Charles-Henri Dumon, who runs the company's businesses in Europe, South Africa and North America, also sold a total of 130,000 shares at prices between 365p and 369p. Two weeks later on December 5, Michael Page announced that a significant slowdown in growth rates would weigh on full-year profits. The news sent the share price falling more than 6 per cent over the week to 325.7p. By contrast when Michael O'Leary, the colourful chief executive of Ryanair, recently disposed of 4m shares, or 7 per cent of his total holdings, and James Osborne, senior independent director at the airline, sold 500,000 shares or 45 per cent of his holdings before bad news, shareholders were less reactive. The following Monday, Ryanair released an announcement that its winter traffic would decline 5 per cent. However, the news that seat sales had declined had been flagged well in advance by Mr O'Leary and Ryanair, leaving the share price unchanged. The company also declined to comment. The well-publicised incident at Michael Page was not the first time directors have sold or bought shares in such circumstances but it underscores an aspect of corporate dealings that investors have little say in and information about. It also demonstrates the impact a director's share disposal may have on the company's market value when it comes, together with bad news, as a surprise to skittish investors. William Claxton-Smith, who worked as a fund manager in the City of London for more than 30 years, says: "Certainly it is something that makes people very unhappy when it happens," adding that while there are often logical grounds for directors to diversify their funds, "directors need to be very careful and behave in a way that doesn't cause any problems."