What you need to know about five blue-chip boardrooms.
Management can make all the difference to a company's success and thus to 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. On the other hand, 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 (UKX): Barclays (LSE: BARC), BP (LSE: BP), GlaxoSmithKline (LSE: GSK), G4S (LSE: GFS) and Shell (LSE: RDSB). Today I am going to summarise what I found:
I analyse management teams from five different angles, and give them a score out of 5 for each. That makes a maximum overall score of 25. Here's my assessment of the five boardrooms:
| | Reputation | Performance | Composition | Remuneration | Shareholdings | Overall Score |
|---|
GSK | 5 | 4 | 3 | 3 | 4 | 19 |
BP | 3 | 3 | 3 | 3 | 4 | 16 |
G4S | 2 | 3 | 3 | 4 | 4 | 16 |
Shell | 2 | 4 | 3 | 2 | 1 | 12 |
Barclays | 3 | 2 | 1 | 1 | 4 | 11 |
The first company to have the honour of topping the leader board is pharmaceutical giant GSK. Ex Vodafone (LSE: VOD) CEO Christopher Gent chairs a board that is bursting with experience, and CEO Andrew Witty has made impressive strides to enhance the company's reputation with shareholders and the general public. And with £17m worth of shares he has put his money where his mouth is.
BP's board scores rather better than rival Shell's. Deal maker Robert Dudley leads a team of executive directors with impressive industry credentials, though the chairman seems a little lightweight for the political pressures that BP has to contend with. With so much at stake in Russia, it could be an Achilles' Heel.
Shell's chairman was the man who turned Nokia from a struggling conglomerate into a mobile phone giant, but he then stayed in charge as it turned into a struggling mobile phone company. A reasonably strong board is held back by their reluctance to invest hard cash in the company's shares.
In equal second place is G4S, whose CEO Nick Buckles has just been put through the wringer by a parliamentary committee over the Olympics staffing debacle. He didn't perform well, but shareholders benefit more from a CEO who builds a business and its share price, as Nick Buckles has done, than from one who can grandstand and verbally joust as politicians are wont to do.
If he is forced to resign I would knock a couple of points of G4S's total score. Neil Woodford, star fund manager at Invesco Perpetual which is G4S's second largest shareholder, has said 'the interests of shareholders are best served by keeping Nick Buckles, because his track record is excellent.' What's more he and the other executive directors have substantial sums invested in the success of the company.
Barclay's erstwhile CEO Bob Diamond resigned following an appearance at another parliamentary committee. But his performance was altogether different: smooth, un-ruffled, but possibly less than frank. He is credited with building up Barclays' investment bank, but the share price has tanked since he became CEO. Barclays' board is overloaded with former investment bankers and without Diamond has little to recommend it.
I've collated all my FTSE 100 boardroom verdicts on this summary page. I hope my research can assist your investment decisions.
Buffett's favourite FTSE share
Let me finish by adding that legendary investor Warren Buffett has always looked for appealing 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.
Where is the UK's leading dividend stock-picker investing today? The identities of Neil Woodford's favourite blue chips are revealed in this free Motley Fool report -- "8 Shares Held By Britain's Super Investor".
Further Motley Fool investment opportunities:
> Tony owns shares in GSK and Shell but no other shares mentioned in this article.
