My Verdict On 5 FTSE Boardrooms

What you need to know about Aberdeen Asset Management plc (LON:ADN), Intertek Group plc (LON:ITRK), Melrose Industries PLC (LON:MRO), Resolution Limited (LON:RSL) and Vedanta Resources plc (LON:VED).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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: Aberdeen Asset Management (LSN: ADN), Intertek (LSE: ITRK), Melrose (LSE: MRO), Resolution (LSE: RSL) and Vedanta Resources (LSE: VED). 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 to make a maximum score of 25. Here’s my overall assessment:

  Reputation Performance Composition Remuneration Shareholdings Overall
Score
Melrose 5 4 3 3 5 20
Intertek 3 4 3 3 4 17
Aberdeen 4 4 2 2 2 14
Vedanta 4 4 1 3 2 14
Resolution 4 1 2 2 2 11

The Grinder

Melrose stands out as one of the highest scoring companies in the index. The company’s business model is to invest in poorly-performing industrial companies and turn them around in a three-to-five year timeframe, and then sell them at a profit. Thus the board and management is the core source of value of the company. The management team formed Melrose in 2003 after working together in 1990’s conglomerate Wassall, and have grown the company’s market cap from £10m to £3.5bn. With a CEO nicknamed ‘the grinder’ for his interrogation of target company accounts, shareholders are in safe hands.

For one of the lesser-known companies on the FTSE 100, testing company Intertek has an impressive chairman in former Tesco chairman Sir David Reid. Its CEO has an odd background: a former medical doctor who became involved in testing when he invented a safer form of ski binding, and who served as a non exec before becoming CEO. A former division of Inchcape, only the finance director remains from before Intertek’s 2002 flotation.

Selling shares

Martin Gilbert co-founded Aberdeen Asset Management in 1983 and has been CEO since, giving no indication of leaving but selling most of his multi-million pound shareholding in the past two years. The company has an unwieldy board, with six executive directors, several of them very long-serving, and it doesn’t look as if oversight of management is easy.  The company has seen spectacular growth, but not without mishap.

Diversified Indian metals and mining group Vedanta has three executive directors: executive chairman Anil Agarwal, deputy executive chairman Navil Agarwal, and CEO Mahendra Mehta. Anil Agarwal founded the company in 1976 and it is still 65% owned by his family trust. There are five non-execs who bring a sensible mix of influence and governance, but without an independent chairman or a finance director there is little external oversight.

Entrepreneur

Life assurance consolidator Resolution has recently brought management in-house, having previously been managed as a fund by insurance entrepreneur Clive Cowdery’s management company. He and co-manager John Tiner are now non-execs on the board, whilst the CEO and finance director previously held the same positions in Resolution’s main subsidiary Friends Life. Bringing management in-house enabled Resolution to maintain its premium listing, but with the external managers-turned-non-execs in line for a substantial profit-share it’s an oddly-composed board.

I’ve collated all my FTSE 100 boardroom verdicts on this summary page. I hope my research can assist your investment decisions.

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 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 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 Tesco but no other shares mentioned in this article.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

This FTSE 250 stock is up 30% in July! Should I buy it now?

This FTSE 250 technology stock has seen its share price rise by 30% already in July. Roland Head asks if…

Read more »

Investing Articles

Forget Rolls-Royce shares! I’d rather buy this FTSE stock

Despite Rolls-Royce (LSE: RR.) shares faring well in recent times, our writer explains why she would prefer to buy this…

Read more »

Investing Articles

Rio Tinto’s share price slumps following production update! Time to buy in?

Poor production news has pulled Rio Tinto's share price sharply lower again. Is the FTSE 100 mining stock now too…

Read more »

Investing Articles

Could investing £20,000 in a Stocks and Shares ISA make me a millionaire?

Ben McPoland takes a look at how many years it might take to grow a £20k Stocks and Shares ISA…

Read more »

Investing Articles

Are these 2 dividend stocks no-brainer buys for a winning portfolio?

Sumayya Mansoor takes a closer look at these dividend stocks to see if they can help her build wealth through…

Read more »

Investing Articles

Does a 35% price drop make Trufin one of the best AIM shares to buy now?

The Trufin share price has just fallen by over a third after Lloyds terminated a contract. Does this make it…

Read more »

Investing Articles

4% yield and 45% growth in 12 months forecasted! I love this passive income investment

Our author says this passive income investment is significantly undervalued with a generous dividend yield. It's at the top of…

Read more »

Woman sneaker shoe and Arrow on street with copy space background
Investing Articles

£5,000 in savings? Here’s how I’d start investing in FTSE shares today

Based on his own experiences, Paul Summers reflects on the steps he'd take if he wanted to begin investing in…

Read more »