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 International Consolidated Airlines Group (LSE: IAG.L ) , the airline formed from the merger of British Airways and Iberia.
IAG is a Spanish holding company. The group's governance structure is complex, with the individual BA and Iberia boards retaining authority over certain aspects. Here are the key directors of the overarching IAG board:
|Antonio Vázquez Romero||(non-exec) Chairman|
|Sir Martin Broughton||(non-exec) Deputy chairman|
|Willie Walsh||Chief Executive|
|Rafael Sánchez-Lozano||CEO, Iberia|
|Keith Williams||CEO, BA|
The former chairman and CEO of Iberia, Antonio Vázquez Romero became chairman of IAG on its formation in 2011. His executive career spans a number of Spanish firms including the then tobacco monopoly Tabacalera and its successor Altadis, Domecq and Telefónica.
Before the merger, deputy chairman Sir Martin Broughton had been chairman of BA since 2004. From 1971 to 2004 he worked for British American Tobacco (LSE: BATS.L ) , rising to be finance director, CEO and subsequently chairman.
Willie Walsh had been CEO of BA since 2005. Starting his career as a pilot with Aer Lingus, he rose through the ranks to become COO of the Irish airline, and subsequently its CEO from 2001 to 2005. He left when, after restructuring the company in the face of tough union opposition, the Irish government refused to privatize it. At BA he has led a successful program of rationalization which also included facing down the unions, a challenge which Iberia has yet to wrestle with.
Rafael Sánchez-Lozano's airline experience is shorter. CEO of Iberia since January 2011, he was appointed COO in 2009 by Iberia's largest shareholder, the savings bank Caja Madrid where he worked in corporate banking, M&A and corporate development. Prior to that he worked at several U.S. banks.
Formerly a career accountant, Keith Williams was finance director of BA for five years before the merger. He played a significant role in BA's restructuring under Willie Walsh.
IAG's 14-strong board is carefully balanced, with three 'tied' non-execs and two independent non-execs each designated by Iberia and BA.
I analyze management teams from five different angles to work out a verdict. Here's my assessment:
|1. Reputation. Management CVs and track record.
|2. Performance. Success at the company.
Good at BA.
|3. Board Composition. Skills, experience, balance
Too political, governance too complex, no FD.
|4. Remuneration. Fairness of pay, link to performance.
ABI issued critical 'amber top' alert over soft performance targets.
|5. Directors' Holdings, compared to their pay.
Generally low. Iberia's CEO has none.
Overall, IAG scores 10 out of 25, equal bottom of the companies I have examined so far. The board looks more like a summit between the two airlines, and shareholders must hope the uncompromising Mr Walsh can force through change over Spanish vested interests.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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