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 recent weeks, I’ve assessed the boardrooms of five companies within the FTSE 100: John Wood (LSE: WG), London Stock Exchange (LSE: LSE), Travis Perkins (LSE: TPK), TUI Travel (LSE: TT) and William Hill (LSE: WMH). Today I am going to summarise what I found.
Five FTSE boardrooms
I analyse management teams from five different angles, giving each a score out of five. Here’s my overall assessment:
| Reputation | Performance | Composition | Remuneration | Shareholdings | Overall Score |
|
|---|---|---|---|---|---|---|
| John Wood | 5 | 4 | 4 | 3 | 4 | 20 |
| LSE | 3 | 4 | 3 | 3 | 4 | 17 |
| TUI Travel | 4 | 4 | 2 | 3 | 4 | 17 |
| Travis Perkins | 4 | 3 | 3 | 3 | 4 | 17 |
| William Hill | 4 | 4 | 2 | 2 | 2 | 14 |
Tight-knit
Aberdeen-based oil services firm John Wood has a tight-knit management team. The CEO of the family firm from 1967 to 2006, Sir Ian Wood, served as chairman until last November. He was replaced by the former CEO, who had previously been deputy CEO and finance director.
Overall the company has supplemented recruitment-from-within with some external hires. The non-exec team, led by former SSE CEO Ian Marchant, has alumni of Shell, Total, Amoco and JP Morgan and is impressive for a smaller FTSE 100 board.
Outperformance
LSE‘s chairman Chris Gibson-smith had to fend off several take-over attempts with former CEO Clara Furze. The CEO since 2009, Xavier Rolet, has made his mark by diversifying the business away from cash equities, during a difficult time for stock markets. The shares have substantially outperformed the FTSE index during his tenure.
Unwieldy
The composition of TUI Travel‘s unwieldy 15-strong board reflects the 56% ownership of TUI AG. TUI Travel’s chairman is CEO of TUI AG and so not independent, and two other TUI AG directors also sit on the UK company’s board. Overall eight independent non-execs face up against seven group employees.
CEO Peter Long ran First Choice Holidays before it merged with TUI in 2007, and has overseen a 45% rise in its shares in that time, against a 7% rise in the FTSE.
Untested Team
Builder’s merchants Travis Perkins will soon have a relatively untested top team, replacing the long-serving CEO and finance director who brought the firm into the FTSE 100 this year. John Carter, who joined the company as a management trainee in 1978, was elevated from chief operating officer to deputy CEO last year in preparation for assuming the top job next year. The finance director who joined April this year is well-regarded, but hasn’t previously been finance director of a listed company.
Unconventional and controversial
It may seem surprising that William Hill should score so poorly, as the stock that has performed well in recent years. However it is heavily dependent on one man, the unconventional Ralph Topping, who has received a couple of controversial retention payment to delay his retirement but nevertheless sold the majority of his shares in the company.
Whilst the shares have raced ahead since 2011, overall since Mr Topping became CEO in 2008 they have lost 9% against a 3% rise for the FTSE.
I’ve collated all my FTSE 100 boardroom verdicts on this summary page, and you can read more about each company by following the links above.
Buffett’s favourite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His recent 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.
Mr Buffett rarely invests outside his native United States, which 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 John Wood, William Hill, SSE and Shell but no other shares mentioned in this article.