What you need to know about the top executives of general insurer RSA Insurance Group plc (LON: RSA).
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 RSA Insurance (LSE: RSA), the FTSE's biggest non-life insurer.
Here are the key directors:
|Martin Scicluna||(non-exec) Chairman|
|Simon Lee||Chief Executive|
|Richard Houghton||Finance Director|
|Adrian Brown||CEO, UK and Western Europe|
With the share dropping 12% this week after the market was surprised by a one-third cut in the dividend, this line-up may not stay in place for long.
Chairman Martin Scicluna should be safe: he only took up the post last month. The former accountant spent 30 years at Deloitte, rising to become UK chairman from 1995 to 2007.
Simon Lee was appointed as CEO in November 2011 following the departure of Andy Haste, the former CEO who had led a successful restructuring during his eight-year tenure. Mr Lee is expanding the insurer's emerging markets business and the need to conserve capital to implement that, along with low bond yields, were the reasons given for the dividend cut.
Operational performance vs investor relations
Mr Lee was a significant player in the firm's turnaround. He ran RSA's international operations under Andy Haste, growing them to become its biggest revenue generator. Previously he had spent 17 years with NatWest Bank.
It's perhaps fair to say that Mr Lee's operational experience is not matched by his experience of dealing with the City, being 15 months into his first public company leadership role.
Either Mr Scicluna or finance director Richard Houghton should have advised better signalling of dividend policy, and communicated with institutions better. But Mr Houghton, too, is in his first public company front-line job, having been appointed in June last year. Arguably RSA's bigger mistake was to increase its dividend last August. But it's easy to see how the outgoing chairman, new finance director, and relatively new CEO might have got that wrong.
Mr Houghton was formerly CFO of Aspen Insurance, and had previously been CFO and COO of RBS Insurance. You need to be a specialised bean-counter to deal with insurance company accounts.
Adrian Brown joined RSA in 1989 and served in a variety of role before becoming CEO of the UK division in 2008. He was appointed to the board in 2011 and Western Europe was added to his remit last year.
RSA's non-execs are understandably mostly from a finance sector background, though I'm surprised by the paucity of consumer sector expertise.
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|
|4. Remuneration. Fairness of pay, link to performance.|
|5. Directors' Holdings, compared to their pay.|
Overall, RSA scores 15 out of 25, a fairly poor result. However it's early days for the new team, and if given the benefit of the doubt by the City it looks capable of delivering good operational results.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
Buffett's favourite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His latest acquisition, Heinz, has long had a reputation for strong management. Indeed Mr Buffett praised its "excellent management" alongside its high quality products and continuous innovation.
So I think it's important to tell you about the FTSE 100 company in which the billionaire stock-picker has a substantial stake. 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 does not own any shares mentioned in this article.