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. On the other hand, 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 Vodafone
Here are the key directors:
|
Director |
Position |
|---|---|
| Gerard Kleisterlee | (non-executive) Chairman |
| Vittorio Colao | Chief Executive |
| Andy Halford | Finance Director |
| Stephen Pusey | Chief Technology Officer |
There is a distinctly continental air at the top of Vodafone. Gerard Kleisterlee, who was appointed chairman last year, spent his entire executive career at Dutch electronics giant Philips. He served as CEO of that company from 2001 to 2011 and is widely credited with streamlining the company in response to the growth of Asian competitors.
Bargain
Vittorio Colao became CEO in July 2008 but has worked on and off for parts of Vodafone or its predecessors since 1996. In his early career he was a McKinsey consultant. He has largely eschewed the strategy of growth by acquisition pursued by his predecessors, and has streamlined the group with sales of some minority interests. However he secured a bargain in the 1-billion-pound acquisition of Cable & Wireless Worldwide after its management had lost the confidence of the market.
Colao is seen as a strong operational manager, and Vodafone shares have outperformed rivals such as BT during his tenure, especially in terms of total return. That was rewarded in the doubling of his total pay package to 14 million pounds this year, which was nevertheless overwhelmingly supported by shareholders.
Finance
A career finance man, Andy Halford joined the board in 2005 having worked at Vodafone since 1999. He has previously been chief financial officer of Vodafone's U.S. associate Verizon Wireless, which no doubt comes in handy when the vital and sensitive subject of the latter's dividend policy is discussed.
Stephen Pusey's career was spent with British Telecom and Nortel prior to joining Vodafone in 2006 and the board in 2009. It is encouraging to see someone on the board who understands the nuts and bolts and wires of Vodafone's technology. However, the company has not replaced the well-respected head of its European operations, Michel Combes, who left in July.
Vodafone's eight non-execs have a broad mix of IT, business, finance, and accounting backgrounds.
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. |
Score 4/5 |
|
2. Performance. Success at the company. |
Score 4/5 |
|
3. Board Composition. Skills, experience, balance |
Score 4/5 |
|
4. Remuneration. Fairness of pay, link to performance. |
Score 3/5 |
|
5. Directors' Holdings, compared to their pay. |
Score 4/5 |
Overall, Vodafone scores 19 out of 25, a strong result putting it among the top of companies that I have looked at so far. You can see 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. 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.
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