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 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 Tesco (ISE: TSCO.L) , Britain's largest supermarket group.
Here are the key directors:
Sir Richard Broadbent
Deputy CEO and CEO of Fresh & Easy
Director, corporate and legal affairs
Sir Richard Broadbent became chairman in November 2011. He has a background in both government and the City. Having worked at the Treasury for 10 years, he joined investment bank Schroders where he rose to become head of European corporate finance. He then rejoined government as executive chairman of Customs and Excise. He was deputy chairman of Barclays prior to his appointment.
Sir Richard had something of a mandate to change the inward-looking culture of Tesco's management, arriving soon after Philip Clarke had replaced Sir Terry Leahey as CEO. Sir Richard's predecessor had been chairman for six years and worked as an executive in the company for 18 years before that.
That mandate escalated dramatically when in January of this year Philip Clarke delivered Tesco's first profit warning in 20 years. Clarke, a lifelong Tesco employee, had replaced Sir Terry just a year earlier. He certainly had large boots to fill: during his 14-year tenure, Sir Terry had transformed Tesco. But many would say it was the hubris of the later Leahey years that led to Philip Clarke's nemesis.
Certainly Clarke's recipe for restoring Tesco's profitability was to refocus attention on the neglected core U.K. food-led business. That trod on the toes of Tesco's U.K. CEO Richard Brasher, who promptly resigned. Time will tell whether being both group CEO and U.K. CEO is too big a job for one man, and whether Philip Clarke's new strategy pays off.
Tim Mason is also a longtime Tesco man who was sent to run the loss-making U.S. chain in 2006. He was given a wider role in the group last year to push its marketing effort.
A chartered accountant, Laurie McIlwee joined the board in 2009 as CFO. He joined Tesco in 2000 as U.K. finance director, assuming an operational role as distribution director in 2004. He had previously undertaken finance and planning roles at PepsiCo.
A former civil servant in the Cabinet Office, Lucy Neville-Rolfe steered Tesco through three competition commission enquiries. She is to retire at the end of the year.
Tesco's team of eight non-execs is also undergoing a period of transformation. The most recent appointment is of a director who brings Internet experience.
I analyze management teams from five different angles to help work out a verdict. Here's my assessment:
1. Reputation. Management CVs and track record.
2. Performance. Success at the company.
3. Board composition. Skills, experience, balance
4. Remuneration. Fairness of pay, link to performance.
5. Directors' holdings, compared to their pay.
Overall, Tesco scores 18 out of 25, a decent result, but shareholders will want to see how well Philip Clarke's strategy works before the man can properly be judged.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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The article The Men and Women Who Run Tesco originally appeared on Fool.com.
Tony Reading owns shares in Tesco, but no other shares mentioned in this article. The Motley Fool owns shares of PepsiCo and Tesco.Motley Fool newsletter serviceshave recommended buying shares of PepsiCo. 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.