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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 (UKX). I hope to separate the management teams that are worth following from those that are not. Today, I am looking at InterContinental Hotels (LSE: IHG ) (NYSE: IHG ) , the world's largest listed hotels group.
Here are the key directors:
|Patrick Cescau||(non-exec) Chairman|
|Richard Solomons||Chief Executive|
|Tom Singer||Finance Director|
|Kirk Kinsell||President, Americas|
|Tracy Robbins||EVP, Human Resources|
Patrick Cescau became chairman at the beginning of this year. A lifelong Unilever employee, he was its CEO from 2005 to 2008, and also served as its chairman and its finance director. His FTSE 100 directorships include International Airlines Group (which must have some interesting spin-offs), Tesco, and, previously, Pearson.
A chartered accountant, Richard Solomons joined IHG predecessor Bass in 1992 after seven years as an investment banker with Hill Samuels. At IHG, he undertook finance and management roles including chief operating officer of the Americas division. He became finance director when IHG listed in 2003 and stepped up to the CEO role in July 2011.
As long-serving FD, Solomons is associated with IHG's asset light business model, and on his appointment to CEO described his role as ensuring "rigorous execution" in a "steady-state world." He has pushed IHG's strategy to enter China and India, and has successfully seen off activist investor Nelson Peltz.
Tom Singer was finance director of Bupa prior to his appointed as Solomons' replacement in 2011. He had previously been FD and chief operating officer of William Hill, and FD of Moss Bros.
Kirk Kinsell joined IHG in 2002, joining the board in 2010 and assuming responsibility for the Americas in 2011. His earlier career was spent in the hotel and leisure sector in the U.S. Tracy Robbins also joined the board in 2011 after joining IHG in 2005. She has 27 years experience in HR at Compass, Forte Hotels, and Tesco.
IHG's six non-execs have mixed backgrounds. The three longest-serving were appointed between 2004 and 2005, so Solomons is the longest-serving director on this board, which the chairman and other executives have only joined in recent years.
The finance director has around 1 million pounds worth of shares, while the other executives have several millions worth. With a 2 million pounds total remuneration in 2012 and shares worth 5 million pounds, Tracy Robbins might well be the highest-paid FTSE 100 HR director.
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.
|2. Performance. Success at the company.
Too early to judge.
|3. Board Composition. Skills, experience, balance
|4. Remuneration. Fairness of pay, link to performance.
Looks on the high side, but uncontroversial.
|5. Directors' Holdings, compared to their pay.
Overall, IHG scores 17 out of 25, a middling result. The CEO looks to be a safe pair of hands and board competent, but the team members are still relatively new in their present roles.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
Buffett's favorite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His recent acquisition, Heinz, has long had a reputation for strong management. Indeed, Buffett praised its "excellent management" alongside its high-quality products and continuous innovation.
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