My Verdict on 5 FTSE Boardrooms

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: BHP Billiton (LSE: BLT  ) , Experian (LSE: EXPN  ) , Marks and Spencer (LSE: MKS  ) , Sainsbury (LSE: SBRY  ) , and Shire (LSE: SHP  ) . 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:

Company 

Reputation

Performance

Composition

Sainsbury

4

4

3

Shire

4

4

3

Experian

3

4

2

BHP

3

3

1

Marks & Spencer

3

2

3

Company

Remuneration

Shareholdings

Overall Score

Sainsbury

3

4

18

Shire

3

4

18

Experian

3

4

16

BHP

3

4

14

Marks & Spencer

1

2

11

Plaudits in this round go to Sainsbury and Shire, with identical scores.

Sainsbury has one of the FTSE's better-known CEOs in Justin King. He is credited with turning the business around from being the Cinderella of the sector when he took over in 2004 to now enjoying its highest market share for a decade, with an enviable track record of 31 consecutive quarters of sales growth. King has fended off speculation that he is planning to step down, but at least shareholders can be reassured that he has a trusty lieutenant in commercial director Mike Coupe.

Cinderella
Cinderella would be an apt description for the FTSE's "third" pharmaceutical company, Shire, which is often in the shadow of its two bigger, uglier sisters, GlaxoSmithKline and AstraZeneca. Maybe if it rebranded itself ShiRe it would attract more attention!

Its management is equally low-profile but nonetheless effective: Shire's share price has multiplied nearly sixfold over the last 10 years, vastly outstripping its big sisters' performance. The company has a strong sense of management continuity, and a CEO designate is already sitting on the board ready to take over when the current CEO steps down in April.

Experian, like fashion retailer Burberry, is a spinoff from conglomerate GUS and, like Burberry, is chaired by Sir John Peace -- that is, when he isn't busy chairing Standard Chartered. The CEO was appointed before the spinoff, and the finance director is an ex-investment banker who advised GUS. The incestuous feel to all that is what marks the board down.

One-man band
The composition of the board is also where BHP's score suffers. It has just one executive, Marius Kloppers. The chairman has barely denied that a replacement is now being sought, though there is a strong senior management team to alleviate disruption upon Kloppers' departure.

It bothers me that there isn't a finance director accountable to shareholders. Instead, the CFO is an employee accountable to the company.

Marks and Spencer's chairman -- who chaired HMV before its demise -- is less well-known than CEO Marc Bolland. The latter has a better heritage as CEO of Wm. Morrison but has struggled with the nonfood side of M&S and is now widely regarded as being on probation. The company has a track record of overgenerous remuneration, and directors' shareholdings are unimpressive.

I've collated all my FTSE 100 boardroom verdicts on this summary page, and you can read more about each company by following the links above.

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.


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