The Men Who Run G4S
LONDON -- FTSE 100 executives are dropping like flies. Now G4S (ISE: GFS.L) is in the news for all the wrong reasons after the company failed to train enough guards for the London Olympics.
G4S will lose up to 50 million pounds directly, but the reputational damage will harm future business. As I write, CEO Nick Buckles is hanging on to his job by a thread.
Management can make all the difference to a company's success -- and thus its share price.
The best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. On the other hand, some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot.
In this series, I'm assessing the boardrooms of companies within the FTSE 100. I hope to separate the management teams that are worth following from those that are not. I've collated all my FTSE 100 boardroom verdicts on this summary page.
This is G4S's top team:
COO and regional CEO, Americas
John Connolly has only been in his post since last month, after the previous chairman fell on his sword following G4S's failed 5 billion pound bid for Danish cleaning services company ISS.
He spent his career with Deloitte, acting as global chairman from 2007 to 2011, and played a key role in the firm's growth. He is also chairman of FTSE 100 oil services group AMEC. Though new to G4S, Connolly brings credibility.
Nick Buckles has been CEO since 2005. He has spent most of his career with G4S and its predecessor company, Securicor, and he can take much of the credit for the group's growth -- both organically and by acquisition. He has led it through more than 70 acquisitions, taking G4S from No. 3 to No. 1 in the global securities business and becoming Europe's largest employer in the process.
The proposed acquisition of ISS dented his reputation. Shareholders objected to the size of the deal and the move into lower-margin cleaning services, as well as the proposed equity dilution.
There is now the question of whether he will take the fall for the Olympics debacle. The chairman is too new to go, and considering such an important contract, the argument is that the CEO should take the blame. But his departure would be a loss to shareholders.
Trevor Dighton is a professional accountant who has spent 17 years with the group -- the last eight as CFO. COO Grahame Gibson has been with the group for 29 years and on the board for seven.
There are six nonexecutive directors who bring relevant experience and contacts, including former Metropolitan Police Commissioner Lord Condon and Ofgas director general Claire Spottiswoode.
I analyze management teams from five different angles to help work out a verdict. Here's my assessment:
Score (out of 5)
Reputation: Management CVs and track record
Connolly is sound but new. Executives are all longtime insiders.
Performance: Success at the company
Two bad episodes mar a successful record.
Board Composition: Skills, experience, and balance.
Good for contacts but light on control.
Remuneration: Fairness of pay and link to performance.
Performance-related remuneration with stretch targets. First FTSE 100 group to introduce claw-backs.
Directors' Holdings: Compared to their pay.
Executive directors have substantial shareholdings.
G4S scores 16 out of 25 -- a decent, if average, result. But any more fallout from the Olympics contract would likely see Buckles go, and that would knock a couple of points off the score.
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At the time this article was published Tony does not own any shares mentioned in this article. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.