What you need to know about the aero engine manufacturer’s top executives.
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 Rolls-Royce (LSE: RR).
Here are the key directors:
| Director | Position |
|---|
| Sir Simon Robertson | (non-exec) Chairman | - |
| John Rishton | Chief Executive |
| Mark Morris | Finance Director |
| James M Guyette | President and CEO, Rolls Royce North America |
| Colin Smith | Director, Engineering and Technology |
| Mike J Terrett | Chief Operating Officer |
Last year the terms of the government's ‘golden share' in Rolls-Royce were relaxed, so that only one of the chairman and CEO must be British. That may come into play when the company seeks a replacement for chairman Sir Simon Robertson who steps down at the end of this year after 8 years. The former investment banker held senior posts in Kleinwort Benson and Goldman Sachs, and is deputy chairman of HSBC (LSE: HSBA).
Smoothly engineered
That's part of a management transition as smoothly engineered as any of Rolls-Royce's engines. John Rishton took up the post of CEO in April 2011, succeeding Sir John Rose who steered the company for 14 years, growing it into the world's second biggest aircraft engine manufacturer.
John Rishton's appointment was something of a surprise. Though a non exec of Rolls-Royce since 2007, his previous post as CEO of Dutch supermarket chain Royal Ahold seemed an unlikely fit. But he had been finance director of Rolls-Royce customer British Airways, and had earlier worked in finance roles at Ford. Both his BA and Ahold jobs involved company turnarounds, but the challenge at Rolls-Royce is more of maintaining the company's market leadership.
Mike Territt, who joined the company in 1978, and Colin Smith, who joined in 1974, provide the engineering expertise on the board. Both are former chief engineers on the flagship Trent engines. Finance director Mark Morris is also a long-time company man, joining in 1986. James Guyette joined in 1997 after a career with United Airlines.
Rolls-Royce's 9 non-execs, who have a broad mix of business and finance backgrounds, include Sir Frank Chapman, the respected CEO of BG Group (LSE: BG).
I analyse management teams from five different angles to help work out a verdict. Here's my assessment:
1. Reputation. Management CVs and track record.
Strong. | Score 4/5 |
2. Performance. Success at the company.
Excellent, but CEO quite new. | Score 4/5 |
3. Board Composition. Skills, experience, balance
Good balance. | Score 5/5 |
4. Remuneration. Fairness of pay, link to performance.
Uncontroversial. | Score 4/5 |
5. Directors' Holdings, compared to their pay.
Execs have sizeable holdings. | Score 4/5 |
Overall, Rolls-Royce scores 21 out of 25. The quality of the board is synonymous with its name. CEO John Rishton is not yet fully tested in the job, and a new chairman will be appointed next year. But the mix of skills, and of insiders and external appointments, is impressive.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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.
Are you a sophisticated investor hoping to profit from this uncertain economy? We urge you to read "10 Steps To Making A Million In The Market" today -- your wealth could be transformed. Click here now to request your free, no-obligation copy. The Motley Fool is helping Britain invest. Better.
Further Motley Fool investment opportunities:
> Tony owns shares in BG Group and HSBC, but no other shares mentioned in this article.
