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: ARM Holdings plc (ADR) (NASDAQ:ARMH), Carnival Corporation (LSE:CCL), CRH PLC (ADR) (LSE:CRH), EVRAZ plc (LON:EVR), and Serco Group plc (LON:SRP). 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. Here’s my overall assessment:
| Company | Reputation | Performance | Composition | Remuneration | Shareholdings | Overall Score |
|---|---|---|---|---|---|---|
| ARM | 4 | 5 | 3 | 3 | 5 | 20 |
| Serco | 4 | 4 | 3 | 3 | 5 | 19 |
| CRH | 4 | 3 | 4 | 3 | 3 | 17 |
| Carnival | 3 | 2 | 1 | 2 | 4 | 12 |
| Evraz | 3 | 2 | 0 | 3 | 2 | 10 |
Geeky
This was a well-spread field. ARM Holdings plc (ADR) (NASDAQ:ARMH) stands out as one of the FTSE’s best-managed companies. It has a close-knit team, and they have driven the company from a small spin-off to the stock market darling of today. The non-execs have a predominantly technological background, which I guess they need if they’re to have oversight of the clever and geeky executives.
Long-serving CEO Warren East is leaving, being replaced by his long-standing lieutenant, following one of the founders who left last year. Shareholders might have slight concerns that the old guard are getting out at the top.
Zeal
Christopher Hyman has presided over a fourfold rise in revenues, and a fivefold rise in profits during his 10 years as Serco Group plc (LON:SRP)’s CEO. One of just a few non-whites to study at South Africa’s Natal University during the Apartheid era, he has sought to carve out an ethical reputation for the group, and was described in the Guardian as “combining the zeal of Cliff Richard with the determination of Seb Coe.” He is one of five chartered accountants on Serco Group plc (LON:SRP)’s seven-strong board, a remarkably skewed skill set.
Three of the four executive directors of Irish building materials group CRH PLC (ADR) (LSE:CRH) are also accountants, including one of only six female finance directors in the FTSE 100. Unsurprisingly, the company has a reputation for strong financial discipline, which has served it well in the difficult environment since 2009, when current CEO Myles Lee stepped up from the finance director role.
Billionaires
Perhaps it’s no coincidence that two companies near the bottom of the league table are run by overseas billionaires.
Carnival Corporation (LSE:CCL), which operates a dual listing with NYSE-listed Carnival Corporation (LSE:CCL), falls well short in governance standards from a U.K. perspective. The chairman and CEO roles are combined in Micky Arison, the billionaire son of the company’s founder, whose family controls 27% of the shares. With no finance director on the board, and an entrenched management, there’s little oversight apparent.
Oligarchs
I wonder if the LSE regrets giving special dispensation to allow EVRAZ plc (LON:EVR) to float just 22% of its shares in 2011. Investors certainly might — the shares have declined by 60% since then. The firm that produces a fifth of Russia’s steel output is controlled by a group of oligarchs close to the Kremlin, including Chelsea-owner Roman Abramovich.
The chairman and CEO are two of the founding oligarchs. There’s no finance director, and the independent non-execs, which include the Queen’s former treasurer Sir Michael Peat, have multiple relationships with the oligarchs’ businesses.
I’ve collated all my FTSE 100 boardroom verdicts on this summary page, and you can see more on each company by following the links above.
Buffett’s favorite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His recent acquisition, H.J. Heinz Company (NYSE:HNZ), has long had a reputation for strong management. Indeed, 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 U.K. Share Warren Buffett Loves” — explains Buffett’s purchase and investing logic in full.
The article My Verdict on 5 FTSE Boardrooms originally appeared on Fool.com.
Tony Reading does not own any shares mentioned in this article. The Motley Fool has no position in any of the stocks mentioned.
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