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Can Investors Trust Management To Deliver At Standard Chartered PLC, Centrica PLC And Diageo plc?

As part of its turnaround, Standard Chartered (LSE: STAN) has completely overhauled its management team. Chief executive Peter Sands is leaving the bank, to be replaced by William T. Winters, the former head of JPMorgan Chase’s investment bank. What’s more, a number of the bank’s regional managers have been replaced in a shake-up of leadership. 

But it’s difficult to try and assess the calibre of Standard’s new management team. Indeed, all of Standard’s new managers have a wealth of experience in the banking industry, although trying to turn around a struggling bank could really test their skills. 

Still, the bank has already laid out its key goals for recovery. It’s targeting a Common Equity Tier 1 ratio of 11% to 12% and sustainable cost savings of more than $400m this year. The group is looking to slash costs by $1.8bn over the next three years with up to 2,000 jobs set to go during 2015. 

Unfortunately, Standard’s turnaround plan is being hampered by a number of factors outside of the bank’s control.

For example, higher charges for bad loans and credit risks continue to weigh on profits. Demands from regulators and higher legal costs are also weighing on the bank. 

It’s these uncontrollable factors that will test the new managers’ skills.

Toughest job in Britain 

Centrica (LSE: CNA) recently announced the appointment of Mark Hodges as managing director of British Gas, ending an 11-month search for a new leader.

It is difficult to try and put into words how important Mark Hodges is for Centrica. As the head of British Gas, Mr Hodges will be responsible for Centrica’s largest division — British Gas generates just under 50% of Centrica’s operating profit.

However, British Gas is also a problem child, and the division is facing wave after wave of criticism from the media and politicians over energy prices. 

The question is, does Mr Hodges have the experience required to take on the media and improve British Gas’ image? 

As Mr Hodges comes from an insurance background, it certainly doesn’t seem like it. He’s joining Centrica from specialist insurance broker, Towergate, which he joined during 2011 after 25 years as a senior executive at Aviva

So only time will tell if Mr Hodges is cut out for, what has been branded, “one of the toughest jobs in corporate Britain”.

Changing habits 

Ivan Menezes became Diageo’s (LSE: DGE) chief executive in 2013 and so far he’s failed to impress. 

During the first three months of this year, sales fell in all of Diageo’s markets apart from North America and Africa. Sales in North American rose 0.9% compared to estimates that called for growth of 2%. 

However, falling sales reflect one of Mr Menezes’ initiatives to reduce stock building. Over the long term, this initiative should reduce levels of inventory at Diageo’s wholesalers and retailers. This should decrease sales volatility and improve the company’s understanding of customer trends. 

Nevertheless, falling sales due to inventory re-adjustments are not Diageo’s only problems. The company is also fighting a legal battle with Vijay Mallya, chairman of India’s United Spirits, which is now 55% owned by Diageo. 

Questions are being asked about a number of suspect payments between United and its parent company, owned by Vijay Mallya. Mr Mallya has promised to challenge Diageo’s findings regarding the payments, and resist efforts to oust him. 

All in all, it seems as if Diageo’s management is letting shareholders down. 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Centrica and Diageo (ADR). We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.