The Men Who Run GKN
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 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 GKN (ISE: GKN.L) , the diversified engineering group.
Here are the key directors:
|Michael Turner||(non-exec) Chairman|
|Nigel Stein||Chief Executive|
|William Seeger||Finance Director|
|Marcus Bryson||CEO, aerospace and land systems|
|Andrew Reynolds-Smith||CEO, automotive and powder metallurgy|
Michael Turner joined the board in 2009, stepping up to chairman just 12 months ago. He is a former CEO and COO of BAE Systems (ISE: BA.L) and is also chairman of Babcock International (ISE: BAB.L) , which with a £3 billion market cap is just a tad larger than GKN at the lower end of the FTSE 100. His executive career gives him an excellent background in GKN's high-tech engineering business, but I am a little wary of chairmen who have multiple calls on their time and energy.
Nigel Stein took over as CEO at the beginning of this year just after Turner became chairman. He joined GKN in 1994 and has undertaken commercial and finance roles including finance director and divisional CEO. It was a smooth transition with many having seen Nigel Stein as being groomed for the post.
William Seeger was another internal appointment as finance director in 2007, having joined the company in 2003 as a divisional CFO. A U.S. citizen, his previous career was spent with U.S. engineering group TRW in finance and planning roles.
Marcus Bryson joined GKN when it acquired Westland Helicopters where he had held finance and commercial roles. He became a divisional CEO in 2006. Andrew Reynolds-Smith also became a divisional head in 2006, having joined the company in 2002. Earlier, he worked at a number of engineering groups and is a former chairman of the CBI Manufacturing Council and member of the Ministerial Advisory Group for Manufacturing.
GKN's four non-execs have backgrounds in engineering, finance, industry, and government, and they look competent. Their ability to hold the executives to account is somewhat compromised by them being outnumbered if the chairman sides with the management team. On the other hand, the presence of divisional heads on the board is itself something of a check on the CEO.
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.|
Good, mostly internal hires.
|2. Performance. Success at the company.|
Too early to judge CEO.
|3. Board Composition. Skills, experience, balance|
More execs than normal on a board this size.
|4. Remuneration. Fairness of pay, link to performance.|
Uncontroversial. Chairman's remuneration looks high.
|5. Directors' Holdings, compared to their pay.|
Overall, GKN scores 15 out of 25, a middling to low result. The score of three across the board reflects that there is little exceptional to report. In a company which mostly recruits from within, it is too early to judge the performance of the recently appointed chairman and chief executive.
I've collated all my FTSE 100 boardroom verdicts on this summary page. I hope it helps with your analysis.
Buffett's favorite FTSE share
Let me finish by adding that legendary investor Warren Buffett has always looked for impressive 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 U.K. 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.
The article The Men Who Run GKN originally appeared on Fool.com.Tony Reading owns shares in BAE Systems 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.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.