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. I hope to separate the management teams that are worth following from those that are not. Today I am looking at Burberry , the luxury-goods group.
Here are the key directors:
Sir John Peace
Sir John Peace might win a prize as the busiest FTSE 100 chairman. He chairs two other members of the index: Standard Chartered (which might have taken a good slug of his time recently, as it was vilified for alleged Iranian sanctions-busting), and information services group Experian (which, like Burberry, was spun off from GUS plc). Sir John was CEO of GUS from 2000 to 2006, having worked in the group for 30 years.
He must know the retail businesses inside out, but something does seem to be wrong with the state of corporate governance when 3% of FTSE 100 boards are run by the same man.
I pointed out last week that once Cynthia Carroll departs from Anglo American, the numbers of women running FTSE 100 firms will have halved from four to two in the last four months. With Burberry's success in China, Angela Ahrendts' position should be secure. She has the distinction of leading the FTSE's only all-female executive team, though notably she recently came out strongly against proposals for boardroom quotas for women.
Ahrendts began her career in the New York fashion scene, including time at Liz Claiborne and Donna Karan, where she did a six-year stint as president. She became CEO of Burberry in 2006 and is credited with turning it around. During her tenure, sales have doubled and the share price has nearly tripled.
A chartered accountant, Stacey Cartwright joined the board as CFO in 2004, two years before Ahrendts. She had previously been finance director of Egg plc, the Internet bank then owned by Prudential. Her earlier career was spent in the Granada group. Since 2011, she has served as a non-executive director at the much larger FTSE 100 member GlaxoSmithKline.
Burberry experienced a shareholder revolt in 2011, with more than 10% of shareholders voting against the remuneration report. Ahrendts and Cartwright received massive share awards as a long-term incentive plan paid out, and promptly sold large chunks of shares. However, Ahrends' pay of 3.7 million pounds in 2011-12 was uncontroversial. Both executives have retained substantial share holdings, as does the chairman.
Burberry's five non-executives have a broad and impressive range of backgrounds. Four of them have share holdings worth between 0.5 million pounds and 1 million pounds.
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, Burberry scores 19 out of 25, a very good result. I'm concerned that the chairman has so many roles, and there would be serious question over succession if Ahrendts calls it a day. But the management team that has been in place for six years has delivered great results for shareholders.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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 and Women Who Run Burberry Group originally appeared on Fool.com.
Tony Reading owns shares in Standard Chartered and GlaxoSmithKline. The Motley Fool recommends Burberry Group and GlaxoSmithKline and owns shares of Standard Chartered and Burberry. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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