What you need to know about the boards of BHP Billiton plc (LON: BLT), Experian plc (LON: EXPN), Marks and Spencer Group Plc (LON: MKS), J Sainsbury plc (LON: SBRY) and Shire PLC (LON: SHP).
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 recent weeks, I've assessed the boardrooms of five companies within the FTSE 100: BHP Billiton (LSE: BLT), Experian (LSE: EXPN), Marks and Spencer (LSE: MKS), Sainsbury (LSE: SBRY) and Shire (LSE: SHP). Today I am going to summarise what I found.
Five FTSE boardrooms
I analyse management teams from five different angles, giving each a score out of five to make a maximum score of 25. Here's my overall assessment:
| | Reputation | Performance | Composition | Remuneration | Shareholdings | Overall Score |
|---|
| Sainsbury | 4 | 4 | 3 | 3 | 4 | 18 |
| Shire | 4 | 4 | 3 | 3 | 4 | 18 |
| Experian | 3 | 4 | 2 | 3 | 4 | 16 |
| BHP | 3 | 3 | 1 | 3 | 4 | 14 |
| Marks & Spencer | 3 | 2 | 3 | 1 | 2 | 11 |
Plaudits in this round go to Sainsbury and Shire, with identical scores.
Sainsbury has one of the FTSE's better-known CEOs in Justin King. He is credited with turning the business around from being the Cinderella of the sector when he took over in 2004, to now enjoying its highest market share for a decade, with an enviable track record of 31 consecutive quarters of sales growth.
Mr King has fended off speculation that he is planning to step down, but at least shareholders can be reassured he has a trusty lieutenant in commercial director Mike Coupe.
Cinderella
Cinderella would be an apt description for the FTSE's 'third' pharmaceutical company Shire, often in the shadow of its two bigger, uglier sisters GlaxoSmithKline and AstraZeneca. Maybe if it rebranded itself ShiRe it would attract more attention!
Its management is equally low profile, but nonetheless effective: Shire's share price has multiplied nearly six-fold over the last ten years, vastly outstripping its big sisters' performance. The company has a strong sense of management continuity, and a CEO designate is already sitting on the board ready to take over when the current CEO steps down in April.
Experian, like fashion retailer Burberry, is a spin off from conglomerate GUS, and like Burberry is also chaired by Sir John Peace – that is, when he isn't busy chairing Standard Chartered. The CEO was appointed before the spin-off, and the finance director is an ex-investment banker who advised GUS. The incestuous feel to all that is what marks the board down.
One Man Band
The composition of the board is also where BHP's score suffers. It has just one executive, Marius Kloppers. The chairman has barely denied that a replacement is now being sought, though there is a strong senior management team to alleviate disruption on Mr Kloppers' departure.
It bothers me that there isn't a finance director accountable to shareholders. Instead the CFO is an employee accountable to the company.
Marks and Spencer's chairman – who chaired HMV before its demise – is less well-known than CEO Marc Bolland. The latter has a better heritage as CEO of Wm Morrison, but has struggled with the non-food side of M&S and is now widely regarded as being on probation.
The company has a track record of over-generous remuneration, and directors' shareholdings are unimpressive.
I've collated all my FTSE 100 boardroom verdicts on this summary page, and you can read more about each company by following the links above.
Buffett's favourite 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 UK Share Warren Buffett Loves" -- explains Mr Buffett's purchase and investing logic in full.
And Mr 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.
> Tony owns shares in GSK, AstraZeneca, Standard Chartered and Rio Tinto but no other shares mentioned in this article. The Motley Fool owns shares in Standard Chartered and has recommended Burberry.
