The FTSE 100 Management Leaderboard
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. Some of the worst firms are those run by executives collecting fat rewards as the underlying business goes to pot.
In recent weeks, I've been assessing the boardrooms of companies within the FTSE 100. Today I'm introducing the leaderboard of the top five companies from the first 15 companies that I've looked at so far.
I look at management teams from five different angles, giving each a score out of five. The scores are added to produce an overall score out of 25.
Reputation | Performance | Composition | |
|---|---|---|---|
Petrofac (ISE: PFC.L) | 4 | 5 | 3 |
GlaxoSmithKline (NYS: GSK) | 5 | 4 | 3 |
BG Group (ISE: BG.L) | 5 | 4 | 4 |
BATS (NYS: BTI) | 3 | 4 | 3 |
BP (NYS: BP) | 3 | 3 | 3 |
Remuneration | Shareholdings | Overall Score | |
|---|---|---|---|
Petrofac | 4 | 4 | 20 |
GlaxoSmithKline | 3 | 4 | 19 |
BG Group | 3 | 2 | 18 |
BATS | 3 | 4 | 17 |
BP | 3 | 4 | 16 |
Yellow Jersey
Oil services group Petrofac has the honor of sporting the first corporate yellow jersey, in the top spot at this stage. The two entrepreneurs who lead the strong executive team have built a 5 billion pound company from virtually nothing. They pay themselves modestly but have massive investments in the company.
Two of the five executives were picked up in opportunistic circumstances. Finance director Tim Weller joined after an ill-timed 14-month stint with Cable and Wireless Worldwide, while Andy Inglis was exploration and production director of BP at the time of the Deepwater Horizon disaster.
With five non execs, Cairn Energy ex-chairman Norman Murray holds the balance of power. I prefer boards that are numerically independent of management, even if the chairman is less distanced than he should be.
Heavyweight
GlaxoSmithKline's board is bursting with experience. It's led by City heavyweight Christopher Gent, who was widely lauded in his former role as CEO of Vodafone. GSK CEO Andrew Witty has done much to enhance the company's reputation with shareholders and the general public. He has 17 million pounds worth of shares backing his judgment.
BG Group has one of the longest-serving CEOs on the FTSE 100. Sir Frank Chapman has been at the helm since 2000 but plans to step down next year. Schlumberger Chairman and CEO Andrew Gould and nine nonexecs watch over the four experienced executives. BG's score is brought down by the miserliness of directors' holdings.
British American Tobacco's result reflects the company's excellent performance. Its three executive directors have an average 27 years' service with the company. With such an ingrained management culture, external scrutiny is vital. Unfortunately, chairman Richard Burrows' former role as chairman of the Bank of Ireland at the time of the bank's collapse doesn't wholly inspire confidence.
Coincidentally, BP's four executives, led by deal maker Robert Dudley, also have an average 27 years' tenure. As with BATS, its finance director is not drawn from the profession -- a potential control weakness. Chairman Carl-Henric Svanberg seems a lightweight in the face of the political pressures BP has to contend with in Russia.
I've collated all my FTSE 100 boardroom verdicts on this summary page, and I'll update the leaderboard after I've looked at another 15 companies.
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The article The FTSE 100 Management Leaderboard originally appeared on Fool.com.
Tony owns shares in BG Group and GSK but no other shares mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of Vodafone Group. 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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