What you need to know about the boards of British Sky Broadcasting Group plc (LON: BSY), RSA Insurance Group plc (LON: RSA), The Sage Group plc (LON: SGE), Smiths Group plc (LON: SMIN) and Whitbread plc (LON: WTB).
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: BSkyB (LSE: BSY), RSA Insurance (LSE: RSA), Sage Group (LSE: SGE), Smiths Group (LSE: SMIN) and Whitbread (LSE: WTB). 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. Here's my overall assessment:
| | Reputation | Performance | Composition | Remuneration | Shareholdings | Overall
Score |
|---|
| Smiths Group | 4 | 4 | 4 | 3 | 4 | 19 |
| Whitbread | 4 | 4 | 4 | 3 | 4 | 19 |
| Sage Group | 3 | 3 | 3 | 3 | 5 | 17 |
| RSA Insurance | 4 | 2 | 3 | 3 | 3 | 15 |
| BSkyB | 3 | 3 | 1 | 2 | 3 | 12 |
Smiths Group and Whitbread take joint honours in this round.
Smiths Group's chairman, City veteran Donald Brydon who also chairs the Royal Mail, is leaving the company to chair, coincidentally, Sage Group. His departure might possibly herald the much-anticipated break-up or a bid for Smiths Group.
The same was said on the arrival of the CEO, Philip Bowman, who has a strong track-record in company demergers and sales. But he's been at the helm for five years with no sign of doing as expected.
Filling Seats
Whitbread's CEO has been in place for just two-and-a-half years, but in that time he's seen a doubling of the share price. Andy Harrison was formerly the boss of easyJet, and his skills in putting bums on seats were clearly transferrable to Whitbread.
The sideways move of the former finance director to head coffee-chain Costa has led to speculation that it's being lined up for demerger.
Recruiting from within
In Sage Group, Mr Brydon joins a company that, typical of smaller FTSE companies based in the provinces, is more likely to recruit its executive directors from within. Guy Berruyer became CEO in 2010 but he's been with the company since 1997. So has the finance director, who was one of several credible internal candidates.
Sage is notable for its strict rule that executive directors, and senior managers immediately below them, must hold shares worth at least 150% of their salary.
Wobbly start
CEO Simon Lee has had a wobbly start at RSA Insurance, with the recent surprise dividend cut going down badly. But poor investor relations shouldn't detract from his operational track-record, which included building up RSA's successful international division over eight years.
The former UK chairman of Deloitte took up the chairman's role at the start of this year.
Sky's score is hammered by its perceived lack of independence from News Corp. Though Rupert Murdoch's company withdrew its bid in the wake of the phone hacking scandal, it retains a 39% interest.
James Murdoch is no longer CEO but he is still on the board, as are three representatives of News Corp. Sky's chairman Nicholas Ferguson, who has been on the board since 2004, is regarded by many as too close to the Murdoch family.
I've collated all my FTSE 100 boardroom verdicts on this summary page, and you can find more on each board by following the links above.
Buffett's favourite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His latest acquisition, Heinz, has long had a reputation for strong management. Indeed Mr Buffett praised its “excellent management” alongside its high quality products and continuous innovation.
So I think it's important to tell you about the FTSE 100 company in which the billionaire stock-picker has a substantial stake. 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 Smiths Group but not any other shares mentioned in this article.
