The FTSE 100 Management Leaderboard

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 firms are those run by executives collecting fat rewards as the underlying business goes to pot.

In recent weeks, I've been assessing the boardrooms of companies within the FTSE 100. I have now examined 45 companies -- almost half the index -- and today I'm looking at the top five of those.

I look at management teams from five different angles, giving each a score out of five. The scores are added to produce an overall score out of a maximum 25. Here's the current running:

Company 

Reputation

Performance

Composition

Diageo (LSE: DEO)

5

5

3

Rolls-Royce (LSE: RR)

4

4

5

Petrofac (LSE: PFC)

4

5

3

Randgold Resources (LSE: RRS)

4

5

3

Land Securities (LSE: LAND)

4

3

4

Company 

Remuneration

Shareholdings

Overall Score

Diageo

3

5

21

Rolls-Royce

4

4

21

Petrofac

4

4

20

Randgold Resources

3

5

20

Land Securities

4

5

20

In fact, Pearson also scored 20, but with respected CEO Marjorie Scardino having since announced her intention to step down, it's likely heading down the leaderboard.

Long-serving
Diageo has jumped into joint first place, which comes as no surprise. A quality company, its share price has reflected the success of its long-serving CEO. Paul Walsh has been running the group since 2000 and was a senior manager for many years before that, and the current shape of the group owes much to his deal-making. Many believe COO Ivan Menezes is being groomed to take over: Paul Walsh was COO himself before stepping up to CEO, and the board has a habit of observing its future leaders in "cadet" roles.

Rolls-Royce has a quality board with no fewer than five executive directors (out of a total of 15). They are all high-caliber, and the board's succession-planning runs as smoothly as its engines. But its response to the recent allegations of corruption in Indonesia will test the company and the new chairman due to be appointed next year, while Rolls-Royce's American rivals are quick to exploit any competitive weakness.

Entrepreneurs
Petrofac and Randgold Resources have similar corporate histories. Both have been built up from small companies by entrepreneurs who continue to run them. That creates future succession issues and concerns over whether there is real control and oversight of management, but on the plus side it means the executives hold large stakes in the business. Randgold has done a better job of creating a corporate-looking board with a highly credible chairman, finance director, and nonexecs providing balance. Still, you can't fault Petrofac's performance.

Like Rolls-Royce, Land Securities has a relatively new CEO, but he joined (in 2010) from smaller rival Great Portland Estates with a strong reputation in the property industry. Chairman Alison Carnwath, the only female to chair an FTSE 100 board, presides over a board with an impressive mix of skills. It's one of the few nonfinancial firms to implement a bonus claw-back mechanism.

I've collated all my FTSE 100 boardroom verdicts on this summary page and will update the leaderboard after I've looked at another 15 companies.

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. So I think it's important to tell you that the billionaire stock-picker has recently acquired a substantial stake in a prominent FTSE 100 company. 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. So why not download the report today? It's totally free and comes with no further obligation.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2175680, ~/Articles/ArticleHandler.aspx, 8/28/2014 3:28:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 6 hours ago Sponsored by:
DOW 17,122.01 15.31 0.09%
S&P 500 2,000.12 0.10 0.00%
NASD 4,569.62 -1.02 -0.02%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes


Advertisement