What you need to know about the top executives of software provider The Sage Group plc (LON: SGE).
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 Sage Group (LSE: SGE), the provider of accountancy software to SMEs.
Here are the key directors:
| Director | Position |
|---|
| Donald Brydon | (non-exec) Chairman |
| Guy Berruyer | Chief executive |
| Paul Harrison | Finance director |
Multi-talented
We saw Donald Brydon in the previous piece in this series, on Smiths Group, where he is also chairman. But the multi-talented veteran board member Mr Brydon announced that he would step down from that role around the time he accepted Sage's chairmanship last September.
Mr Brydon is also busy chairing the Royal Mail and the Medical Research Council. Questioned on his appointment to Sage he told the Financial Times: “When I became chairman of the London Metal Exchange I had never been a metal trader. I took on the chairmanship of Smiths Group and I am not an engineer, and I am chairman of Royal Mail but had never worked at a logistics business.”
He is a former CEO of Barclays' investment management arm and AXA Investment Management.
Inside knowledge
Guy Berruyer was appointed CEO in October 2010, stepping up from running its European and Asian businesses. A Frenchman, he had joined the company in 1997 to run its French operations, and joined the board three years later. He thus knows the company inside out, and was credited with growing the regional businesses. Previously he worked in the software and hardware sectors in France.
During his tenure as CEO the company has been accused of being slow to respond to the rise of internet and cloud computing, growth has been slower than anticipated mainly due to the company's reliance of the European and US economies, and there have been a couple of failed acquisitions. Nevertheless the share price has outperformed the FTSE 100.
A chartered accountant, Paul Harrison moved straight from PricewaterhouseCoopers to become financial controller of Sage in 1997, moving up to finance director in 2000. He was regarded as one of three credible internal candidates to take over the CEO role at the time of Mr Berruyer's appointment. Based in Newcastle, Sage fits a pattern of smaller provincial FTSE firms in being more likely to recruit from within.
Executives' shares
Sage has a small board but its four non execs have a good spread of backgrounds and experience. The company has recently extended guidelines for directors' shareholding, which include a minimum of 150% of salary to be held in shares, to key management below board level.
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. Good. | Score 3/5 |
| 2. Performance. Success at the company. Good. | Score 3/5 |
| 3. Board Composition. Skills, experience, balance Sensible. | Score 3/5 |
| 4. Remuneration. Fairness of pay, link to performance. Reasonable. | Score 3/5 |
| 5. Directors' Holdings, compared to their pay. Significant, and mandated. | Score 5/5 |
Overall, Sage scores 17 out of 25, which puts it in the top half of companies I have looked at. For a small FTSE company based far from London it has done well to recruit a big-hitter chairman, though one wonders how much time he will spend on the company.
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.
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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 does not own any shares mentioned in this article.
