My Verdict on 5 More FTSE Boardrooms
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 investments to hold 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'll summarize the latest five: Associated British Foods (ISE: ABF.L) , Glencore (ISE: GLEN.L) , Imperial Tobacco (ISE: IMT.L) , SSE (ISE: SSE.L) , and Xstrata (ISE: XTA.L) .
Five FTSE boardrooms
I analyze management teams from five different angles, giving each a score out of five. Here's my overall assessment:
Company | Reputation | Performance | Composition |
|---|---|---|---|
ABF | 3 | 4 | 2 |
Imperial Tobacco | 3 | 4 | 3 |
SSE | 3 | 4 | 2 |
Glencore | 3 | 2 | 2 |
Xstrata | 3 | 2 | 2 |
ABF | 4 | 4 | 17 |
Imperial Tobacco | 3 | 4 | 17 |
SSE | 3 | 4 | 16 |
Glencore | 2 | 3 | 12 |
Xstrata | 2 | 3 | 12 |
Associated British Foods and Imperial Tobacco take joint honors in this heat, scoring 17 out of a possible 25.
ABF has an unusual board, with CEO George Weston being a member of the Weston family that controls the company with 55% of its shares. That puts the onus on chairman Charles Sinclair to look after the interests of minority shareholders, but as a former CEO of Daily Mail & General Trust, he has first-hand experience handling family owners. A strong track record of performance, decent directors' holdings, and sensible, performance-related pay compensate.
Imperial Tobacco has the distinction of being one of just four FTSE 100 companies with a female CEO. Imperial has a strong tradition of recruitment from within: Alison Cooper has been with the company since 1999, becoming CEO in 2010 when the previous incumbent retired after 14 years. Her 3 million pounds' worth of shares puts many better-paid CEOs to shame, particularly those in the banking sector. Finance director Robert Drybus, who has been with the company since 1985, has 10 million pounds' worth.
SSE's executive directors also have a long and successful track record with the company, and confidence is reflected in their sizable holdings of shares. Its score for board composition is held back by two factors. Chairman Lord Smith of Kelvin has many other demands on his time, serving also as chairman of FTSE 100 engineer Weir Group and the government's proposed Green Investment Bank and sitting in the House of Lords. Meanwhile, the other nonexecs, though impressive individuals, seem an odd bunch, being neither consumer champions nor from relevant industries.
Neither Glencore nor Xstrata scores well. In Glencore's case, the nonexecs, led by the septuagenarian ex-foreign Legionnaire and adventurer Simon Murray, do not look strong enough to hold the substantial shareholder-managers in check.
Xstrata's CEO, Mick Davis, has built up the company through acquisitions but has come under fire for his generous remuneration. Like ABF, Xstrata has a big shareholder -- Glencore, with 34% -- but chairman Sir John Bond has won little support for his handling of Glencore's bid and the massive retention payments Xstrata had proposed.
I've collated all my FTSE 100 boardroom verdicts on this summary page. I hope my research can assist your investment decisions.
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Tony owns shares in ABF, Imperial Tobacco, SSE and Xstrata but no other 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.
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