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. I hope to separate the management teams that are worth following from those that are not. Today I am looking at Aberdeen Asset Management (LSE: ADN), the fund manager with an emerging market and Asia Pacific focus.
Here are the key directors:
|Roger Cornick||(non exec) Chairman|
|Martin Gilbert||Chief executive|
|Andrew Laing||Deputy chief executive|
|Bill Rattray||Finance director|
|Anne Richards||Chief investment officer|
|Hugh Young||MD, Asia and equities|
|Rod MacRae||Head of risk|
Roger Cornick has been chairman since 2009, but was a board member from 2004. He spent 20 years with Perpetual, before its merger with Invesco in 2000, ending as its deputy chairman.
Martin Gilbert co-founded Aberdeen as a start-up in 1983 and has been CEO for 27 years. The firm’s growth has been powered by acquisitions but has not been without upset: it nearly failed in the wake of the split cap scandal some 10 years ago and since had to claw its way back into the FTSE 100.
In parallel, Mr Gilbert was on the board of First Group from 1985 and its chairman from 1995, resigning in the face of investor ire when that company was forced to make an emergency rights issue earlier this year.
Having joked that he would leave Aberdeen when Sir Alex Ferguson left Manchester United, he has given no indication of his departure but sale of most of his multi-million pound holding in the company over the last two years suggests otherwise.
Andrew Laing’s unusual position as deputy CEO complicates that matter. Is he an automatic replacement for the CEO? Otherwise, would it be tenable to have been Deputy CEO since 2008 and yet stay on the board if passed over in favour of an outsider? Mr Laing has a long history with the company, having joined in 1986 and becoming chief operating officer in 1987.
Bill Rattray is also a long-time company man, joining in 1985. A chartered accountant, he became finance director in 1991. 1985 also saw the arrival of Hugh Young to manage Aberdeen’s Asian equities. Subsequently based in Singapore he built up Aberdeen’s biggest business, but was only appointed to the board in 2011.
A relative newcomer, Anne Richards worked for Merrill Lynch Investment Management and subsequently Edinburgh Fund Managers where she was chief investment officer when it was acquired by Aberdeen in 2003. A chartered accountant, Rod McRae also joined on the acquisition of Edinburgh Fund Managers, where he was chief operating officer.
Aberdeen faced some strong shareholder opposition to its remuneration report in 2011 and again in the ‘shareholder spring’ of 2012.
Aberdeen’s seven non execs are overwhelmingly drawn from the investment management sector. That’s probably helpful in holding an entrenched management to account.
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.
Successful but not without mishap.
|3. Board Composition. Skills, experience, balance
Lack of fresh blood and succession issues.
|4. Remuneration. Fairness of pay, link to performance.
|5. Directors’ Holdings, compared to their pay.
Most execs have substantial holdings, but CEO no longer has.
Overall, Aberdeen scores 14 out of 25, a poor result. The company’s growth has been a remarkable success, but an entrenched management led by a CEO selling shares as if they are going out of fashion doesn’t inspire confidence in the board.
I’ve collated all my FTSE 100 boardroom verdicts on this summary page.
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> Tony does not own any shares mentioned in this article.