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: Croda International (LSE: CRDA.L  ) , Old Mutual (LSE: OML.L  ) , Randgold Resources (LSE: RRS.L  ) , Tullow Oil (LSE: TLW.L  ) , and Unilever (LSE: ULVR.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. Here's my overall assessment, marked out of a maximum 25:

 Company

Reputation

Performance

Composition

Randgold Resources

4

5

3

Tullow Oil

4

5

4

Croda International

3

4

3

Old Mutual

4

4

3

Unilever

4

3

 

 Company

Remuneration

Shareholdings

Overall Score

Randgold Resources

3

5

20

Tullow Oil

2

4

19

Croda International

3

5

18

Old Mutual

3

3

17

Unilever

3

4

17

These companies have all scored in the top half of firms I have looked at so far.

RandGold's score of 20 puts it in joint second overall. The company owes much of its success to CEO Mark Bristow, the former South African Army officer who has run it since incorporation in 1995. His 56 million pounds worth of shares strongly aligns his interest with shareholders.

With a project finance banker experienced in Africa as chairman, a longstanding finance director, and five nonexecutives with impressive mining and banking backgrounds, the board looks extremely competent.

Tullow Oil has a similar history. It was founded in 1985 by its current CEO, Aidan Heavey, who has steered its growth into an FTSE 100 company. Unlike the geology-trained Bristow however, Heavey was a former financial controller of Irish airline Aer Lingus who spotted an opportunity in undervalued African oil wells.

Aidan Heavey's lack of technical background is compensated for by a chairman from Anglo-American, a chief operating officer from Shell, and a finance director from BP. Heavey's shareholding is worth 90 million pounds, but the CFO has staked little in the business. Tullow's score is held back by overgenerous remuneration: Half of shareholders have voted against the long-term incentive plan.

Croda joined the FTSE 100 in March and is one of its smallest constituents. Consequently, its board has more of a mid-cap feel to it. The chairman and two of its three executive directors are long-serving company men. CEO Steve Foots joined as a graduate trainee in 1990. Though the board members don't have quite the same weight as larger FTSE peers, they look competent, and their investment in the firm puts many larger companies to shame.

Julian Roberts stepped up from finance director to CEO of Anglo-South African financial group Old Mutual in 2008. He has spent most of his career in the insurance sector and has done much to restructure the company since it was badly hit by the financial crisis. With a finance director from Prudential and a chairman who was finance director of Zurich Insurance, there is no shortage of relevant skills on the board.

Unilever's history is one of internal recruitment. The current chairman and CEO were both external appointments, making this the first time either post has been held by outsiders. Chairman Michael Treschow is a respected Swedish industrialist but lacks prior experience in fast-moving consumer goods. However, CEO Paul Polman is an alumnus of Procter & Gamble and Nestle. The composition of the board is a little quirky and light on finance.

I've collated all my FTSE 100 boardroom verdicts on this summary page. I hope my research can assist 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. 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.

Tony owns shares in Unilever and Shell but no other shares mentioned in this article. The Motley Fool has recommended Unilever. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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