What you need to know about the top executives at Reckitt Benckiser plc (LON: RB.).
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 Reckitt Benckiser (LSE: RB) (NASDAQOTH: RBGLY.US), the household-to-healthcare consumer products group.
Here are the key directors:
| Director | Position |
|---|
| Adrian Bellamy | (non-exec) Chairman |
| Rakesh Kapoor | Chief Executive |
| Liz Doherty | Finance Director |
Adrian Bellamy, together with deputy chairman Peter Harf, is the longest-serving director, having joined the newly-formed board in 1999 when Reckitt and Benckiser merged. He became chairman in 2003. His background is in international retail and luxury goods, and he was previously chairman of Gucci and The Body Shop.
Rakesh Kapoor took over as CEO from Bart Becht in September 2011. Mr Becht had been CEO since the merger and was credited with the company’s considerable success over that period, with the shares rising six-fold. An Indian national, Mr Kapoor joined the company in 1987 and worked in a variety of roles, initially in India, and then in several regions and globally.
Arguably RB’s star had begun to wane before Mr Kapoor became CEO, but though he has not enjoyed such plaudits the share price has kept up with the FTSE 100 and rival Unilever during his tenure. Mr Kapoor is carving out a new strategy, reorganising to focus more on emerging markets, and shifting the product mix towards healthcare.
Departure
That, in part, may explain the impending departure of finance director Liz Docherty. In March she will be replaced by Adrian Hennah, former finance director of healthcare group Smith and Nephew who previously spent 20 years at GlaxoSmithKline.
Appointed by the previous CEO in January 2011, it also seems that Ms Docherty’s face did not fit with the new CEO. In unusually frank language, Mr Kapoor said that ‘Liz and I have agreed that RB’s and her way of working are not as well matched as either of us would like’. Mr Hennah is expected to act more in the nature of a chief operating officer and less as a pure bean-counter.
It’s understandable if Mr Kapoor needs a reliable left-hand man at board meetings. The two executives are outnumbered four-to-one by the chairman and 7 non-executives. What a contrast with Next, the last company I reviewed, which has 4 executives and 5 non-execs including the chairman.
Formidable
And deputy chairman Peter Harf must be formidable. He is CEO of the private investment company Joh. A. Benckiser which owns about 15% of RB’s shares and which since the merger has been entitled to nominate a director. An impressive-looking bunch of non-execs includes two serving FTSE 100 CEOs and the former finance director of Vodafone.
I analyse management teams from five different angles to work out a verdict. Here's my assessment:
1. Reputation. Management CVs and track record.
Decent. | Score 3/5 |
2. Performance. Success at the company.
Promising. | Score 3/5 |
3. Board Composition. Skills, experience, balance
Great individuals, balance suspect. | Score 4/5 |
4. Remuneration. Fairness of pay, link to performance.
Uncontroversial (now). | Score 3/5 |
5. Directors’ Holdings, compared to their pay.
Kapoor’s is substantial. | Score 3/5 |
Overall, Reckitt Benckiser scores 16 out of 25, a fairly poor result but one that reflects the short tenure of the CEO and the changeover of FD rather than any particular cause for concern.
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.
> Tony owns shares in RB, Unilever, GSK and Vodafone but no other shares mentioned in this article. The Motley Fool has recommended Unilever and Vodafone.
