What you need to know about the top executives of engineering firm The Weir Group PLC (LON: WEIR).
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 Glasgow-based pump-maker Weir Group (LSE: WEIR).
Here are the key directors:
|Lord Smith of Kelvin||(non-exec) Chairman|
|Keith Cochrane||Chief Executive|
|Jon Stanton||Finance Director|
Lord Smith of Kelvin has been chairman since 2002, and has also chaired the bigger FTSE 100 member SSE since 2005. A chartered accountant, he is a former chairman of the BBC and CEO of Morgan Grenfell Asset Management.
In addition to sitting as a crossbench life peer and holding a slew of public service appointments, he is also chairman of the new Green Investment Bank. If I were a Weir shareholder I'd be concerned whether the company gets his full attention.
Results at this job better than the last
Keith Cochrane is also a chartered accountant, and was finance director from 2006 to 2009, when he was elevated to CEO.
Mr Cochrane started his career with Arthur Andersen in Glasgow, and moved to Perth-based Stagecoach after working on its flotation. He rose to become finance director and then CEO of Stagecoach under executive chairman and founder Brian Souter.
This was a turbulent time for Stagecoach, with Mr Cochrane spending half his time in the US trying to turn around its troubled acquisition Coach USA, and he resigned in 2002 after disappointing results.
He joined Scottish Power in 2003 and was effectively deputy finance director, having been passed over for the top job in favour of Simon Lowth, now AstraZeneca's finance director.
Mr Cochrane's leadership of Weir has been more fruitful, with the shares tripling during his tenure as CEO.
First FD role
Jon Stanton is in his first finance director role, having joined Weir in 2010 from Ernst & Young. Mr Staunton had joined Ernst & Young in 1988, becoming a partner in 2001, and was in charge of the audit of FTSE 250 engineer Invensis.
Weir has six non-execs. They are an impressive bunch for such a small FTSE 100 constituent, led by senior independent director Lord Robertson of Port Ellen, the former defence secretary and NATO Secretary General. Weir is remarkably well-represented in the House of Lords.
Notably there are non-execs with backgrounds in each of Weir's three main markets, mining, oil and gas, and power.
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|
Very strong, though chairman is busy man.
|4. Remuneration. Fairness of pay, link to performance.|
|5. Directors’ Holdings, compared to their pay.|
CEO £4.6m-worth, chairman £2.5m.
Overall, Weir scores 17 out of 25, a middle-order result. A chairman with a bigger job elsewhere, a CEO with a slightly unfortunate history, and an FD fresh out of the profession doesn't look auspicious, but you can't fault the results during the CEO's tenure.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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> Tony owns shares in AstraZeneca and SSE, but no other shares mentioned in this article. The Motley Fool has recommended Weir Group and Stagecoach.