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 supermarket chain Sainsbury .
Here are the key directors:
David Tyler became chairman toward the end of 2009. A qualified accountant, his background is largely in finance. Having started his career on Unilever's respected management trainee program, he undertook various finance roles in that group before becoming finance director of Natwest Investment Bank, then auction house Christie's, and then GUS, where he played a major role in its demerger.
He took over from Sir Philip Hampton as the latter decided to concentrate his attentions as chairman of RBS. But in another example of multitasking chairmen, Tyler will take on the chairmanship of FTSE 100 REIT Hammerson in May. That may throw up some interesting discussions about unlocking the value in Sainsbury's property portfolio.
King of the supermarkets
Justin King is one of the better-known FTSE CEOs, as someone who runs a well-known company, is outspoken (he recently vocally criticized the Chancellor's shares-for-employment-rights plan), and has achieved a successful turnaround in Sainsbury's performance. When he joined as CEO in 2004, the business was in a poor state. It has reported 31 consecutive quarters in sales growth and recently marked its highest market share for a decade -- though the share price is pretty much where it was when he started.
Before Sainsbury, King was director of food at Marks & Spencer for three years, and in senior roles at Asda for seven years before that. His earlier career was also the food sector, with Mars, PepsiCo, and Grand Metropolitan.
King has denied repeated speculation that he is about to announce his resignation. If he does, then Mike Coupe is in pole position to succeed him. He has been commercial director since 2010, overseeing trading, marketing, IT, and online operations. He joined Sainsbury as trading director in 2004 and became a board member in 2007. Also a Unilever management trainee, his career included stints with Tesco, Asda, and Iceland stores.
Finance and property
John Rogers' early career was in engineering. He subsequently moved into consultancy and then became finance director of Hanover Acceptances, an investment company. He joined Sainsbury in 2005 as director of group finance. He undertook finance and property roles before becoming CFO in June 2010.
Sainsbury's five non0execs have good-looking CVs, though none of them are especially well-known corporate names.
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 with their pay.
Overall, Sainsbury scores 18 out of 25, a good result. Investors credit Justin King with doing a good job in a tough market, and if he does decide to move on, there seems to be a smooth succession plan.
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 Who Run J. Sainsbury originally appeared on Fool.com.
Tony Reading owns shares in Unilever and Tesco but no other shares mentioned in this article. The Motley Fool recommends PepsiCo and Unilever and owns shares of PepsiCo and Tesco. 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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