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. I have now examined 45 companies -- almost half the index -- and today I'm looking at the top five of those.
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 a maximum 25. Here's the current running:
Company | Reputation | Performance | Composition |
|---|---|---|---|
Diageo (LSE: DEO) | 5 | 5 | 3 |
Rolls-Royce (LSE: RR) | 4 | 4 | 5 |
Petrofac (LSE: PFC) | 4 | 5 | 3 |
Randgold Resources (LSE: RRS) | 4 | 5 | 3 |
Land Securities (LSE: LAND) | 4 | 3 | 4 |
Company | Remuneration | Shareholdings | Overall Score |
|---|---|---|---|
Diageo | 3 | 5 | 21 |
Rolls-Royce | 4 | 4 | 21 |
Petrofac | 4 | 4 | 20 |
Randgold Resources | 3 | 5 | 20 |
Land Securities | 4 | 5 | 20 |
In fact, Pearson also scored 20, but with respected CEO Marjorie Scardino having since announced her intention to step down, it's likely heading down the leaderboard.
Long-serving
Diageo has jumped into joint first place, which comes as no surprise. A quality company, its share price has reflected the success of its long-serving CEO. Paul Walsh has been running the group since 2000 and was a senior manager for many years before that, and the current shape of the group owes much to his deal-making. Many believe COO Ivan Menezes is being groomed to take over: Paul Walsh was COO himself before stepping up to CEO, and the board has a habit of observing its future leaders in "cadet" roles.
Rolls-Royce has a quality board with no fewer than five executive directors (out of a total of 15). They are all high-caliber, and the board's succession-planning runs as smoothly as its engines. But its response to the recent allegations of corruption in Indonesia will test the company and the new chairman due to be appointed next year, while Rolls-Royce's American rivals are quick to exploit any competitive weakness.
Entrepreneurs
Petrofac and Randgold Resources have similar corporate histories. Both have been built up from small companies by entrepreneurs who continue to run them. That creates future succession issues and concerns over whether there is real control and oversight of management, but on the plus side it means the executives hold large stakes in the business. Randgold has done a better job of creating a corporate-looking board with a highly credible chairman, finance director, and nonexecs providing balance. Still, you can't fault Petrofac's performance.
Like Rolls-Royce, Land Securities has a relatively new CEO, but he joined (in 2010) from smaller rival Great Portland Estates with a strong reputation in the property industry. Chairman Alison Carnwath, the only female to chair an FTSE 100 board, presides over a board with an impressive mix of skills. It's one of the few nonfinancial firms to implement a bonus claw-back mechanism.
I've collated all my FTSE 100 boardroom verdicts on this summary page and will 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 Diageo but no other shares mentioned in this article. Motley Fool newsletter services have recommended buying shares of Diageo. 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.
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