What you need to know about the aerospace and defence group'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 Meggitt (LSE: MGGT), the third constituent of the FTSE 100’s aerospace and defence sector alongside the much larger BAE Systems (LSE: BA) and Rolls-Royce (LSE: RR).
Here are the key directors:
| Director | Position |
|---|
| Sir Colin Terry | (non-exec) Chairman |
| Terry Twigger | Chief Executive |
| Stephen Young | Finance Director |
| Philip Green | Corporate Affairs Director |
The chairman of a company whose biggest business is making aircraft brakes could scarcely have a more appropriate background than Sir Colin Terry. The aeronautical engineer spent 30 years in the RAF, rising to the rank of Air Marshal and undertaking the roles of Head of Logistics and Chief Engineer. He is a past president of the Royal Aeronautical Society and currently is chairman of the UK Military Aviation Authority Safety Advisory Committee. He has been chairman of Meggitt since 2004.
Chartered accountant
Terry Twigger is a chartered accountant who spent most of his earlier career in finance in the aerospace sector. He was at Lucas Aerospace for 15 years, rising to the role of finance director, before joining Meggitt in 1993. He served as Meggitt’s finance director from 1995 to January 2001 when he became CEO on the retirement of the previous incumbent. Since that time Meggitt’s shares have put on 70% compared to a 15% drop for BAE’s.
Current finance director Stephen Young is also a career finance man, though with a more varied background. He has been finance director of Thistle Hotels, the Automobile Association and Thorn EMI, prior to joining Meggitt in his current role in 2004.
Corporate affairs director Philip Green has served on the board since 2001. He is responsible for legal and compliance matters, and his presence on the board is perhaps indicative of the seriousness with which Meggitt treats these matters. That is perhaps most pertinent when considered against the difficulties that BAE Systems has experienced over allegations of corruption. Mr. Green joined Meggitt in 1994 as company secretary, having previously spent 14 years at BAE.
And more accountants
With three of Meggitt’s six non-execs being chartered accountants, half the board is made up of chartered accountants including a former finance director of Rolls-Royce. That might seem to make it somewhat of a finance-heavy board, though some may argue it's a case of ‘you can't have too much of a good thing’.
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.
Excellent chairman, generally good. | Score 4/5 |
2. Performance. Success at the company.
Very strong. | Score 4/5 |
3. Board Composition. Skills, experience, balance
Finance-heavy but sound. | Score 3/5 |
4. Remuneration. Fairness of pay, link to performance.
Slightly controversial awards to Young and Green this year. | Score 3/5 |
5. Directors’ Holdings, compared to their pay.
Execs have big holdings. | Score 4/5 |
Overall, Meggitt scores 18 out of 25, a good result. With just a £3bn market cap, Meggitt’s shareholders cannot expect its board to be filled with the great and the good, but it looks competent and sound, with an excellent chairman.
I've collated all my FTSE 100 boardroom verdicts on this summary page. I hope it helps with your research.
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 Meggitt and BAE Systems but no other shares mentioned in this article.
