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 London Stock Exchange (LSE: LSE), which operates the Borsa Italiana and a number of equity, bond and derivative markets as well as the London Stock Exchange itself.
Here are the key directors:
| Director | Position |
|---|---|
| Chris Gibson-Smith | (non-exec) Chairman |
| Xavier Rolet | Chief Executive |
| David Warren | Finance Director |
| Rafaele Jerusalmi | CEO, Borsa Italiana |
Takeover defence
Chris Gibson-Smith has been chairman since 2003, in which time he has fended off several takeover attempts alongside the previous CEO Clara Furse. His executive career was spent with BP, including being chief geologist and subsequently a managing director. Retiring from BP in 2001 he became chairman of National Air Traffic Services, and subsequently acquired a prestigious array of non-executive directorships, including being chairman of British Land from 2007 to 2012 and a non-exec of Lloyds Banking from 1999 to 2005.
Xavier Rolet was appointed in 2009. A former investment banker, he worked for Goldman Sachs, CSFB, Dresdner Kleinwort Benson and then Lehman Brothers from 2000 to 2008 (when it went bankrupt) as co-head of global equity trading.
Diversified
Rolet has diversified LSE’s business away from cash equities, with recent acquisitions of technology provider MillenniumIT, and a majority stake in LCH.Clearnet. The transformation has been notable, with LSE’s shares substantially outperforming the FTSE 100 during Mr Rolet’s tenure.
David Warren is a relatively new arrival, having been appointed finance director last year. He was previously CFO of LSE’s rival Nasdaq for nine years, followed by two years as advisor to its CEO. Apart from him bringing obvious relevant experience, some have suggested his appointment may be a preliminary part of a plan for LSE to make a bid for Nasdaq, a rival which unsuccessfully tried to acquire LSE.
Rafaele Jerusalmi joined the board in 2010. A former fixed income trader with CSFB, he joined Borsa Italiana in 1998 and became head of capital markets for LSE when it acquired the Italian exchange in 2007.
LSE’s eight non-execs bring substantial markets and business experience.
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. Sound. |
Score 3/5 |
|
2. Performance. Success at the company. Very good. |
Score 4/5 |
|
3. Board Composition. Skills, experience, balance Sensible. |
Score 3/5 |
|
4. Remuneration. Fairness of pay, link to performance. Uncontroversial. |
Score 3/5 |
|
5. Directors’ Holdings, compared to their pay. CEO has £3m shares, chairman £1m. |
Score 4/5 |
Overall, LSE scores 17 out of 25, a decent result. Mr Rolet has made a notable mark since his arrival and during a difficult time for stock exchanges.
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 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.
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.
