What you need to know about the top executives of mining group BHP Billiton plc (LON: BHP).
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 BHP (LSE: BLT) (NYSE: BBL.US), the global mining group.
Here are the key directors:
|Jac Nasser||(non-exec) Chairman|
|Marius Kloppers||Chief Executive|
Half-way through my review of FTSE 100 boards this is the first that has just one executive director, so it's especially surprising that it should be the twelfth largest company in the index.
With multi-billion dollar write downs being announced in the mining sector, investors might be comforted by the presence of a finance director on the board. Glencore also plans to have no finance director after its merger with Xstrata. Personally I see more value in having a bean-counter directly accountable to shareholders than any amount of corporate governance codes about part-time independent directors.
Rant over, let's look at the individuals. Jac Nasser has been on the board since 2006, becoming chairman in 2010. An Australian, his executive career was spent with Ford, rising to become CEO from 1998 to 2001. He left Ford in the wake of the controversy over fatal accidents involving Firestone tyres fitted on Ford SUVs, which saw him reluctantly testifying to a US Congressional committee amidst a near 20% plunge in Ford's share price. He then worked as an advisor to JP Morgan Chase's private equity unit.
South African Marius Kloppers joined BHP in 1993 after an earlier career in petrochemicals and management consultancy, rising to join the board in 2006. At that time BHP had three executive directors: when former CEO Chip Goodyear left the next year, Mr Kloppers was chosen over finance director Chris Lucas to replace him and Mr Lucas departed shortly afterwards.
Mr Kloppers was seen as a good steward during the financial crisis, maintaining a sound balance sheet, and during his tenure BHP's share price has risen 32% whilst rivals Anglo American and Rio Tinto have declined 39% and 11% respectively. However he has been criticised for several failed mega-deals, and following write-downs after big US shale gas acquisitions last year (for which Mr Kloppers forewent his bonus), there has been open speculation that the company is searching for a replacement.
Internal candidates include several divisional heads and the CFO who sit on a group management committee chaired by Mr Kloppers.
Around half of BHP's non-execs have a background in the natural resources sector, which seems a sensible balance. They include former minister Baroness Shriti Vadera, Gordon Brown's most trusted advisor on financial markets. Presumably it's not the done thing to mention car crashes at the BHP board.
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.|
|2. Performance. Success at the company.|
|3. Board Composition. Skills, experience, balance|
No FD, One CEO, on way out...
|4. Remuneration. Fairness of pay, link to performance.|
|5. Directors' Holdings, compared to their pay.|
Overall, BHP scores 14 out of 25, a poor result. With just one executive, undermined by anticipation of his departure, there is a corporate governance deficit.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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> Tony owns shares in Rio Tinto and Xstrata, but no other shares mentioned in this article.