The Men Who Run BG Group
LONDON -- 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 (UKX). I hope to separate the management teams that are worth following from those that are not. Today I am looking at BG Group (ISE: BG.L) , the integrated natural gas company.
Here are the key directors:
|Andrew Gould||(Non-exec) chairman|
|Sir Frank Chapman||Chief executive|
|Chris Finlayson||Executive director|
Andrew Gould has been a non-exec for 12 months, and became chairman in May. A chartered accountant, he was previously chairman and CEO of Schlumberger, the oil services group, where he spent most of his career. He was also a non-exec director of Rio Tinto.
Sir Frank Chapman is that rare specimen, an engineer running a FTSE 100 company. After a career with Shell and BP, he joined BG in 1996 and became CEO in 2000. That's a long stint at the top, during which the share price has increased five-fold. He plans to step down next year, which might explain his selling a large chunk of shares in May -- though he still has 18 million pounds worth.
Appointed as CFO in 2011, Fabio Barbosa was previously CFO of Vale, the Brazilian mining company, and earlier served in the Brazilian finance ministry. That's a useful background given the importance of BG's Brazilian operations.
Martin Houston has been with BG for 29 years and has 10 million pounds worth of shares to his name. Chris Finlayson is a more recent arrival, having spent 33 years with Shell.
BG has nine non-execs with backgrounds in industry, government, and banking. The senior non-exec is Baroness Hogg, formerly head of the prime minister's policy unit.
I analyze management teams from five different angles to work out a verdict. Here's my assessment:
|1. Reputation. Management CVs and track record.|
|2. Performance. Success at the company.|
Chapman's tenure has been successful
|3. Board Composition. Skills, experience, balance|
|4. Remuneration.Fairness of pay, link to performance.|
Controversy in 2010. Well linked to performance.
|5. Directors' Holdings, compared to their pay.|
2 out of 5 execs with big holdings
Overall, BG scores 18 out of 25, one of the better management teams in the FTSE 100.
Frank Chapman's departure next year will be a loss, but the company has shown itself adept at succession planning. BG faces some challenges ahead, but the company is in safe hands.
If you are interested in the oil and gas sector, you should take a look at this new Motley Fool report, "How to Unearth Great Oil and Gas shares." It's brand new and crammed full of tips on how to find great companies, research and value them, and just as importantly, when to sell. It's free, and you can download it here.
Buffett's favorite FTSE share
Let me finish by saying that legendary investor Warren Buffett has always looked for appealing management teams when pinpointing which shares to buy. So I think it's important to tell you that the billionaire stock picker has recently acquired a substantial stake in a prominent FTSE 100 company.
A special free report from The Motley Fool -- "The One UK Share Warren Buffett Loves" -- explains Buffett's purchase and investing logic in full.
And Buffett, don't forget, rarely invests outside his native United States, which to my mind makes this British blue chip -- and its management -- all the more attractive. So why not download the report today? It's totally free and comes with no further obligation.
Are you a sophisticated investor hoping to profit from this uncertain economy? We urge you to read "Ten Steps To Making A Million In The Market" today -- your wealth could be transformed. Click here now to request your free, no-obligation copy. The Motley Fool is helping Britain invest. Better.
Further Motley Fool investment opportunities:
The article The Men Who Run BG Group originally appeared on Fool.com.Tony owns shares in BG, Rio Tinto, and Shell but no other shares mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.