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 (UKX): British Land (LSE: BLND.L ) , BT Group (LSE: BT-A.L ) , Land Securities (LSE: LAND.L ) , Lloyds Banking (LSE: LLOY.L ) (NYSE: LYG ) and Vodafone (LSE: VOD.L ) . 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 total of 25. Here's my assessment:
This heat is very much a race of two halves, with Land Securities (Britain’s biggest REIT) and mobile phone giant Vodafone some distance ahead of the rest of the field.
Land Securities’ board, run by the only female FTSE 100 chairman, has impressive credentials. CEO Robert Noel only joined in 2010 but established a good reputation at rival Great Portland Estates, whilst the FD has been in situ since 2005. Non-execs include Sir Stuart Rose, former CEO and chairman of Marks & Spencer.
Land Securities scores exceptionally well on the alignment of the interests of its executives and shareholders. Not only is it one of very few firms outside the financial sector to have a claw-back mechanism in place for directors' bonuses, but it has clear guidelines for executive share ownership with the CEO holding at least twice his salary in shares.
Vodafone's board also has strength in depth, with the CEO and FD both having worked in the company for over 10 years. CEO Vittorio Colao has won the confidence of shareholders with a strategy of streamlining the group, and pulled off the 1 billion pound bargain acquisition of Cable & Wireless Worldwide. He took home 14 million pounds last year, but his high remuneration has been supported by strong performance.
Though rival BT's executives look competent and have performed well, the non-execs look somewhat lightweight and chairman Sir Michael Rake arguably has too much on his plate. He is also chairman of airline easyJet, which is fighting a long-running battle with disgruntled shareholder Stelios Haji-Ioannou, and deputy chairman of troubled bank Barclays.
That British Land's 13 strong board includes no less than five executive directors is, for me, one of its strong points. Though unfashionable, personally I think it's beneficial for different aspects of the business to be represented on the board. There is no single reason why the company scores poorly compared to rival Land Securities. It is simply just a little less impressive, with relatively generous remuneration and low directors' holdings.
The board of Lloyds Banking has a big task but the jury is still out on whether its two executives can put it off. The former CEO of Santander's U.K. subsidiary, Antonio Horta-Osorio, has been CEO for 18 months but took six weeks off for work-related stress in this time. He seems gradually to be building up a shareholding commensurate with his remuneration. Finance director George Culmer only joined the board four months ago, after the previous incumbent jumped ship.
I've collated all my FTSE 100 boardroom verdicts on this summary page. I hope my research can assist you in your investment decisions.
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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And Buffett, don't forget, rarely invests outside his native United States, which to my mind makes this British blue chip -- and its management -- all the more attractive. So why not download the report today? It's totally free and comes with no further obligation.
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- 8 Income Plays Held by Britain's Super Investor
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- The Market's Top Sectors
Tony owns shares in Vodafone but no other shares mentioned in this article.