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 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 British Sky Broadcasting Group plc (LON:BSY), Europe’s largest pay TV operator.
Here are the key directors:
| Director | Position |
|---|---|
| Nicholas Ferguson | (non-exec) Chairman |
| Jeremy Darroch | Chief Executive |
| Andrew Griffith | Finance Director |
Fallout
Sky’s board is shaped by the fallout from News Corp (NASDAQ:NWS).‘s failed bid in 2011. Rupert Murdoch’s attempt to take full control of the firm failed in the wake of the hacking affair at News Corp.’s newspaper division. His son James Murdoch, who had previously been CEO of Sky from 2003, stepping up to become chairman in 2007, was finally forced from the role in April last year though he remains on the board. News Corp. retains its 39% interest in Sky.
His closeness to the Murdoch family and strong support for James Murdoch has brought into question his independence in the eyes of some of Sky’s institutional investors.
Coal miner’s grandson
Jeremy Darroch’s background could scarcely be more different from the media mogul’s son he replaced as CEO in December 2007. But then with James Murdoch becoming chairman as Darroch moved up from the finance director seat, he was perhaps expected to act more like a chief operating officer.
His early career was spent in finance roles in The Procter & Gamble Company (NYSE:PG), after which he became finance director of Dixons before joining Sky in 2004 as finance director.
Sky’s current FD, Andrew Griffith, is a chartered accountant who worked as an advisor in the technology and media sector at investment bank Rothschild before joining Sky in 1999. When he became CFO in 2008 he was the youngest finance director in the FTSE 100.
Reconstruction
Since the failed News Corp. bid Sky’s board has been in the process of reconstruction, not least as several non-execs were butting up aganst the nine-year time limit after which they are not considered independent.
In addition to James Murdoch, there are three News Corp. representatives on the 14-strong board: News Corp.’s CFO, COO, and legal advisor. The chairman, two execs and four News Corp representatives thus make up half the board.
New non-execs include the CEO of Aberdeen Asset Management plc, which voted against James Murdoch’s re-election and the remuneration report last year.
I analyze management teams from five different angles to help work out a verdict. Here’s my assessment:
| 1. Reputation. Management CVs and track record.Reasonable. | Score 3/5 |
| 2. Performance. Success at the company.Good. | Score 3/5 |
| 3. Board Composition. Skills, experience, balanceBarely independent. | Score 1/5 |
| 4. Remuneration. Fairness of pay, link to performance.Somewhat controversial. | Score 2/5 |
| 5. Directors’ Holdings, compared to their pay.Reasonable. | Score 3/5 |
Overall, Sky scores 12 out of 25, a poor result. It’s barely independent of News Corp. and still has a lot of historical baggage.
I’ve collated all my FTSE 100 boardroom verdicts on this summary page.
Buffett’s favorite FTSE share
Let me finish by adding that legendary investor Warren Buffett has always looked for impressive management teams when pinpointing which shares to buy. His latest acquisition, H.J. Heinz Company (NYSE:HNZ), has long had a reputation for strong management. So I think it’s important to tell you about the FTSE 100 company in which the billionaire stock-picker has a substantial stake.
The article The Men Who Run British Sky Broadcasting Group originally appeared on Fool.com and is written by Tony Reading.
Fool contributor Tony Reading has no position in any stocks mentioned. The Motley Fool recommends H.J. Heinz and Procter & Gamble.
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