LONDON -- 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. 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. Today I am looking at Centrica (ISE: CNA.L) .
Here are the key directors:
Sir Roger Carr
Managing director, British Gas
Managing director, Centrica Energy
Managing director, North America
Roger Carr has been chairman since 2004. He is president of the CBI, deputy chairman of the Court of the Bank of England, and a City grandee par excellence, though not wholly without controversy in his career. He has previously been criticized for taking on too many roles, and he was chairman of Mitchells and Butlers when it lost 440 million pounds on financial transactions and chairman of Cadburys when it was taken over by Kraft, leading to the closure of its U.K. factory.
Sam Laidlaw joined as CEO in 2006, having previously worked for oil groups Chevron, Enterprise Oil, and Hess. During his tenure, turnover, profit, EPS, and dividend have all grown well, though the share price is up by just a third and is still below 2007's high. He has progressed a strategy of vertical integration, acquiring upstream assets to hedge the company's exposure to retail energy prices.
The last two years have seen Mr. Laidlaw benefit from performance-related pay schemes that have attracted negative publicity -- perhaps inevitable for the owner of British Gas.
Nick Luff is a chartered accountant who joined in 2007 from P&O, where he was CFO. Phil Bentley was previously Centrica's finance director and also spent 15 years at BP, while Mark Hanafin spent 21 years at Shell.
With six nonexecutives, Centrica does not have a majority of independent directors following a resignation of the seventh nonexec last year. However, the intention is to recruit a new nonexec with upstream and operational experience in the U.S. to complement the existing skill set.
I analyze management teams from five different angles to work out a verdict. Here's my assessment:
Score (out of 5)
Reputation -- management CVs and track record
Top-flight chairman and CEO
Performance -- success at the company
Good -- except for the share price!
Board Composition -- skills, experience, and balance
Dominated by the management team
Remuneration -- fairness of pay and link to performance
Directors' Holdings -- compared to their pay
Laidlaw has 8 million pounds' worth of shares, Bentley holds 7 million pounds' worth, and Carr's holding is negligible
Overall, Centrica scores 15 out of 25 -- a middling result. Though Sam Laidlaw has produced results, a possibly overburdened chairman with no financial commitment to the company and a rather weak team of nonexecs don't provide enough oversight.
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The article The Men Who Run Centrica originally appeared on Fool.com.
Tony owns shares in Shell but no other stocks 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.
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