LONDON — 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: Antofagasta plc. (LON:ANTO), Fresnillo Plc (LON:FRES), Rexam PLC (LON:REX), The Weir Group PLC (LON:WEIR) and WPP. Today I am going to summarize what I found.
Five FTSE boardrooms
I analyze 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:
| Repu- tation | Perform- ance | Com- position | Remun- eration | Share- holdings | Overall Score | |
|---|---|---|---|---|---|---|
| WPP | 5 | 4 | 5 | 1 | 4 | 19 |
| Rexham | 4 | 4 | 4 | 3 | 4 | 19 |
| Weir Group | 2 | 4 | 4 | 3 | 4 | 17 |
| Antofagasta | 3 | 3 | 1 | 2 | 3 | 12 |
| Fresnillo | 4 | 3 | 0 | 3 | 1 | 11 |
Top spot
WPP and Rexam PLC (LON:REX) share top spot. WPP‘s chairman Sir Martin Sorrell is so well-known that its website barely bothers to provide a CV. Sir Martin created the company from virtually nothing by a series of audacious takeovers, and it’s now one of three global players.
WPP also boasts a former U.S. ambassador to the U.K. and deputy White House chief-of-staff as its chairman. It’s an impressive looking board all round. But Sir Martin’s generous pay package-£13 million last year-is a sore point with investors.
Turnaround
Fewer investors are familiar with Rexam‘s CEO Graham Chipchase. But he’s done a remarkable job of turning the packaging company around since he became CEO in 2010, a job dubbed a “poisoned chalice” at the time by one analyst. Shares have risen 70% on the back of asset disposals, cost cutting, and moves into emerging markets.
Weir has two members of the House of Lords on its nine-strong board, though Chairman Lord Smith of Kelvin is perhaps more occupied with his chairmanship of the much-bigger SSE and the new Green Investment Bank. The Weir Group PLC (LON:WEIR)’s shares have tripled since Keith Cochrane became CEO, though an earlier less successful spell at Stagecoach, together with a finance director in his first commercial role, gives the company a slightly under-average score for directors’ reputation.
Miners
The two South American miners in the FTSE 100 score poorly. Both companies are family run firms but that doesn’t necessarily equate to poor corporate governance, as companies such as Schroders and ABF testify.
Jean Paul Luksic, whose family owns 65% of Antofagasta, is its executive chairman. That means there’s no separation of chairman and CEO roles, and no finance director with fiduciary responsibility to shareholders. The recently appointed CEO of Antofagasta plc. (LON:ANTO)’s operational subsidiary is well-respected, but not being on the main board his first responsibility is to his employers, not shareholders.
