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. I hope to separate the management teams that are worth following from those that are not. Today, I am looking at Tate & Lyle (LSE: TATE ) , the company whose name is synonymous with sugar but which has transformed itself into a specialty ingredients manufacturer.
Here are the key directors:
|Sir Peter Gershon||(non-exec) Chairman|
|Javed Ahmed||Chief Executive|
|Tim Lodge||Finance Director|
We have met Sir Peter Gershon already in this series. He is also chairman of National Grid, a post he took up earlier this year. He has been chairman of Tate & Lyle since 2009, though his background seems more appropriate for his role at the utility. Most of his career was spent in the technology and telecommunications sectors. He was in charge of GEC's defense businesses until it was sold to BAE Systems. He then joined the civil service and was responsible for the Gershon Review into public spending efficiency for the Blair administration.
The announcement of Javed Ahmed's appointment as CEO in May 2009 after the company had suffered a series of profit warnings sent the shares up 8%. That's some golden hello from investors in golden syrup! He took up the role in November of that year and promptly sold the company's sugar refining business including the brand name of Lyle's Golden Syrup, continuing the strategy already established of refocusing the business away from commodities and onto value-added products.
An American with an MBA from Stanford, Ahmed started his career at Procter & Gamble. After a stint as a Bain consultant, he joined Benckiser (later Reckitt Benckiser), serving as regional head in a number of locations, and rising to be executive vice president of Europe. The regard in which he was held in this post was reflected in Tate & Lyle's share price rise, though his FMCG background was a somewhat odd fit for Tate & Lyle's refined strategy.
Tim Lodge completes the lineup of new executives appointed in 2009. His was an inside job: A chartered accountant, he had worked for the company for 20 years in operational and financial roles, including as acting finance director for three months before his permanent appointment. Well regarded, he today announced that the company has completed a 350 million pound deal that transfers half the risk of the company's pension deficit volatility onto an insurance company.
Tate & Lyle has no fewer than seven non-executives to hold management to account. They have mixed background, with a good portion of relevant industry experience.
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.
|3. Board Composition. Skills, experience, balance
|4. Remuneration. Fairness of pay, link to performance.
|5. Directors' Holdings, compared to their pay.
CEO has 8-million-pound worth, over 10 times base salary.
Overall, Tate & Lyle scores 19 out of 25, a top quartile result. It's a small negative that the chairman has another FTSE 100 company to chair, but overall this is an impressive board.
I've collated all my FTSE 100 boardroom verdicts on this summary page. I hope it helps with your analysis.
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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