The Men Who Run Antofagasta

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 Antofagasta , the Chilean copper mining group.

Here is the key director:



Jean-Paul Luksic

Executive Chairman

Code, what code?
With 65% of Antofagasta's shares owned by the Luksic family the U.K. Corporate Governance Code, which requires separation of the roles of chairman and chief executive, gets short shrift.

The company's 2011 annual report says that "the board considers that its predominantly non-executive composition combined with delegation of significant responsibility for operational management to divisional level achieves an appropriate balance and prevents a concentration of power in its executive chairman".

To quote Mandy Rice-Davis, they would say that, wouldn't they? Nearly all FTSE boards have a majority of non-execs, and they also have operational management.

Board composition
Antofagasta's board comprises Luksic and eight non-execs, five of which are considered independent. Luksic has been chairman since 2004 and executive chairman since last year. He's been with the family firm for 20 years, and previously was CEO of Antofagasta Minerals, the principal operating subsidiary.

The three non-independent non-execs are Jean-Paul Luksic's brother, Ramon Jara who provides advisory services to the company, and Hugo Dryland, a mining corporate financier at Rothschild which provides advice to the company.

Surprise resignation
It wasn't always thus. Marcelo Awad, who had been recruited in 1996 as sales manager, was CEO for six years until March 2012. His surprise resignation, a week before the 2011 results were announced, was variously put down to differences of opinion over strategy and delays at Antofagasta's important Esperanza mine.

Luksic took over executive responsibilities "on an interim basis while a successor was identified", but it looks as if he's entrenched. In July last year the company appointed Diego Hernandez, the former head of Chilean state miner Caldeco, as CEO of Antofagasta Minerals. Hernandez provided the commentary on the 2012 preliminary results, but isn't on the main board.

So there's confusion over who the real CEO is. Even the Financial Times described Mr Hernandez as Antofagasta's CEO in reporting last year's results this week. I have a problem with chief financial officers who are not on the main board, so they don't have fiduciary responsibilities to shareholders. That's even more of an issue with the effective CEO.

In Antofagasta's favor, its non-execs are a credible-looking bunch of mainly mining executives. More tellingly, the shares have risen eight-fold in the past 10 years.

Luksic's pay is not performance related in any way, though with £0.5 billion worth of shares to his name that's academic.

I analyze management teams from five different angles to help work out a verdict. Here's my assessment:

. Management CVs and track record.


. Success at the company.

Very good, but new CEO.

. Skills, experience, balance


Fairness of pay, link to performance.


, compared to their pay.

Barely any apart from Luksic.

Overall, Antofagasta scores 12 out of 25, a poor result. The individuals look good, but governance is confusing.

I've collated all my FTSE 100 boardroom verdicts on this summary page.

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Fool contributor Tony Reading has no position in any stocks mentioned. The Motley Fool recommends Antofagasta. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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