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 Resolution (LSE: RSL), the life assurance consolidator that merged Friends Provident and the life assurance businesses of AXA UK and BUPA to form Friends Life.
Here are the key directors:
|Sir Malcolm Williamson||(non exec) Chairman|
|Andy Briggs||Chief executive|
|Tim Tookey||Finance director|
A little history is required to understand Resolution’s board. The company was formed by insurance entrepreneur Clive Cowdery to acquire and restructure UK life assurance companies, and was run like a fund management vehicle with an external manager owned by Mr Cowdery. However this project-based strategy stalled and in March this year management was brought in house. All three key directors were appointed to their posts as part of this year’s restructuring.
Sir Malcolm Williamson is a former CEO of Standard Chartered and Visa International, and had served as chairman of Friends Provident prior to the restructuring. A career banker who started at Barclays, Sir Malcolm undertook a slew of financial sector directorships since his retirement from Visa in 2004.
Andy Briggs had been CEO of Friends Life since 2011, having previously been CEO of Scottish Widows and CEO of general insurance at Lloyds Banking. At Friends Life he has been stripping costs whilst diversifying into corporate pensions.
Tim Tookey was appointed finance director of Friends Life in 2012. A chartered accountant, he is a former finance director of Heath Lambert, Prudential UK and subsequently Lloyds Banking, serving briefly as its interim CEO in 2011/12.
Resolution’s board includes the two of the principals behind the former external manager that will cream off 10% of Friends Life’s profits once some hurdle conditions are met.
Clive Cowdery was highly successful with an earlier venture called Resolution, which consolidated closed ‘zombie’ life assurance assets. Resolution Ltd is a second venture whose shares have lost 25% since their IPO in December 2008. Mr Cowdery is now bidding for a US insurer in a separate business venture.
John Tiner was the CEO of the external manager. A former accountant responsible for Arthur Andersen’s worldwide financial services practice, he subsequently worked for the Financial Services Authority and was its CEO from 2003 to 2007.
In addition there are nine independent non execs, all with financial services backgrounds.
The CEO and FD are required to hold 300% and 250% respectively of base salary in shares, but these have largely been gifted to them on joining.
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.
Very poor since flotation.
|3. Board Composition. Skills, experience, balance
Still contains vested interests.
|4. Remuneration. Fairness of pay, link to performance.
Payout/potential payout to external managers controversial.
|5. Directors’ Holdings, compared to their pay.
Overall, Resolution scores 11 out of 25, a poor result. The board has been ‘normalised’ so Resolution can maintain its listing, but it needs a cleaner break with the past to achieve a convincing change in governance.
I’ve collated all my FTSE 100 boardroom verdicts on this summary page.
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> Tony owns shares in Standard Chartered but no other shares mentioned in this article. The Motley Fool owns shares in Standard Chartered.