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 budget airline easyJet (LSE: EZJ).
Here are the key directors:
| Director | Position |
|---|---|
| John Barton | (non-exec) Chairman |
| Carolyn McCall | Chief Executive |
| Chris Kennedy | Finance Director |
Sir Stelios
John Barton was appointed chairman in May this year in succession to Sir Michael Rake, the chairman of BT and deputy chairman of Barclays. Mr Barton is also chairman of FTSE 100 member Next and FTSE 250 insurer Catlin, and had previously been chairman of Brit Insurance & Jardine Lloyd Thompson, WH Smith and ill-fated Cable & Wireless Worldwide. A chartered accountant, he was CEO of insurance broker JIB from 1984 to 1997.
A major task for him is to manage relations with easyJet founder and 37% shareholder Sir Stelios Haji-Ioannou, who has clashed with the company over plans to buy new aircraft, and who several times tried to force out Sir Michael. Ironically one of Sir Stelios’ criticisms of Sir Michael was his multiplicity of FTSE roles. Sir Stelios gave up rights to appoint board members in return for a financial payout in 2010.
Turnaround
Carolyn McCall is one of just three female CEOs in the FTSE 100. She was appointed in 2010. She had previously been CEO of Guardian Media Group, where she spent most of her career, starting as a researcher in 1986. She is credited with effecting a significant turnaround at easyJet in a difficult economic environment.
As profits have risen, the share price has trebled under her tenure, taking the company into the FTSE 100 this March. She has bolstered operational performance and punctuality, improved morale and extended the company’s reach into business passengers. However her career at the Guardian saw some controversy: she oversaw its acquisition of publisher Emap for £1bn at the top of the market and left after the crash when Emap had become worthless.
Chris Kennedy joined as finance director on the same day as Ms McCall and shares credit for the turnaround. Starting his career in management consultancy and private equity, he worked at EMI from 1993 to 2001 in finance and investment roles.
Remuneration
Sir Stelios has voted against easyJet’s remuneration report in each of the last three years. But in the last two years, as performance has turned around under Ms McCall, institutional shareholders have largely supported the board.
EasyJet has a large board with eight non-execs. They have a wide range of backgrounds including aviation and tourism, and are no doubt ballast to the largest shareholder’s interventions.
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. Generally good. |
Score 3/5 |
|
2. Performance. Success at the company. Successful turnaround. |
Score 5/5 |
|
3. Board Composition. Skills, experience, balance. Logical. |
Score 3/5 |
|
4. Remuneration. Fairness of pay, link to performance. See above. |
Score 3/5 |
|
5. Directors’ Holdings, compared to their pay. CEO has £1m-worth, but is a recent big seller. |
Score 2/5 |
Overall, easyJet scores 16 out of 25, a middling result. The company’s executives have effected a successful turnaround, but relationships with the largest shareholder are likely to continue to be problematic.
I’ve collated all my FTSE 100 boardroom verdicts on this summary page.
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> Tony owns shares in Barclays but no other shares mentioned in this article.
