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 John Wood Group (LSE: WG), the smallest of the three oils services groups in the FTSE 100.
Here are the key directors:
| Director | Position |
|---|---|
| Allister Langlands | (non-exec) Chairman |
| Bob Keiller | Chief Executive |
| Alan Semple | Finance Director |
| Mark Dobler | Director, GTS division |
| Mike Straughen | Director, Engineering division |
| Robin Watson | Director, PSN division |
Code violation
Allister Langlands was appointed chairman last November after serving for CEO for five years, deputy CEO for eight years and finance director for the previous eight years. Thus his elevation to chairman was a considerable diversion from the UK Corporate Governance Code, but not one lightly entered into by the company. It consulted over 40% of shareholders, in a process led by senior independent director Ian Marchant, until recently CEO of SSE.
The unusual move reflects a tight-knit management group in the Aberdeen-based firm, and the big boots that needed filling on the retirement of the outgoing chairman Sir Ian Wood. He was CEO of his family’s firm from 1967 to 2006, transforming it from a ship repair business when oil was discovered in the North Sea.
At the same time Bob Keiller stepped up from running PSN (a company of which he was CEO when John Wood bought it in 2010) to the CEO post. A chartered engineer who joined BP‘s graduate programme, he has spent his career in the oil and gas business. He created PSN by leading a buy-out of the UK production services division of Kellogg Brown and Root, part of Halliburton, in 2006.
IPO
Alan Semple has been finance director since 2000, before John Wood’s 2002 IPO. He had previously been finance director of a number of Scottish companies. Both Mark Dobler and Robin Watson joined the board at the beginning of this year, having run their respective divisions before that. Mark Dobler joined the group in 2002 and Robin Watson in 2010, from rival Petrofac. Mike Straughen joined in 2007 after 25 years with the third FTSE 100 oil services firm Amec, where he ran UK operations.
Ian Marchant is a prestigious senior independent director amongst the seven non-execs, which include alumni of BP, Shell, Total, Amoco and JP Morgan.
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. Excellent. |
Score 5/5 |
| 2. Performance. Success at the company. Very good over long time frame. |
Score 4/5 |
| 3. Board Composition. Skills, experience, balance Impressive, but somewhat management dominated. Surprisingly no former finance director on the board (apart from Ian Marchant). |
Score 4/5 |
| 4. Remuneration. Fairness of pay, link to performance. Uncontroversial. |
Score 3/5 |
| 5. Directors’ Holdings, compared to their pay. CEO has £14m-worth, longer-serving directors £1m plus. |
Score 4/5 |
Overall, John Wood scores 20 out of 25, very good result. Whilst there is great continuity, there is also some recruitment from outside. Oversight of the management may be a little impaired, but the non-execs should all understand the business well.
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 owns shares in John Wood, Petrofac, SSE and Shell but no other shares mentioned in this article. The Motley Fool has recommended Petrofac.
