The Men Who Run Carnival

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 Carnival  (LSE: CCL  ) , the world's largest cruise operator.

Here are the key directors:

Director Position
Micky Arison Chairman and chief executive
Howard Frank Vice chairman and chief operating officer
Pier Foschi Chairman and CEO, Carnival Asia

Carnival and Panama-incorporated Carnival Corporation  (NYSE: CCL  ) operate a dual listing whereby shareholders of both share equal economic and voting rights. The two companies have identical boards and officers and produce combined accounts according to U.S. accounting principles.

Captain
The governance arrangements are also more familiar to U.S. investors and deficient from a U.K. perspective: The chairman and CEO roles are combined, and the chief financial officer does not have a seat on the board.

Micky Arison is, therefore, very much captain of the ship. The billionaire is the son of Carnival Corporation's co-founder and has worked at the company through his career, starting at the bottom and progressing to become CEO in 1979 and chairman in 1990. He steered its growth through acquisition, including the 2003 merger with P&O Princess Cruises, Carnival's predecessor. Family interests control 27% of the combined voting power. He also owns the Miami Heat basketball team.

Under fire
Arison has recently come under fire over Carnival's safety record, with the Senate Commerce Committee chairman complaining of the cost to the U.S. Coast Guard of reacting to Carnival's 90 "serious events" in the last five years and the Costa Concordia disaster in Europe. In the past 10 years, Carnival's shares have underperformed the FTSE 100 by 30%.

Aged 70, Howard Frank has been vice chairman since 1993 and chief operating officer since 1989. He was formerly an accounting partner with Price Waterhouse.

Pier Foschi started his career at the OTIS Elevator Company. He joined Costa Crociere as CEO in 1997, assuming the additional role of chairman when the Italian company was acquired by Carnival in 2000. He joined Carnival's main board in 2003.

Two months after the sinking of the Costa Concordia in Jan. 2012, Foschi retired as CEO of Costa Cruises at age 65 in accordance with a long-term succession plan. He was appointed chairman and CEO of Carnival Asia, to develop the group's regional presence, in Sept. 2012.

Sea Lord
The two Brits among Carnival's eight-strong non-execs provide the maritime expertise: Sir Jonathon Bond, former First Sea Lord and Chief of Naval Staff, and Anglo-American chairman Sir John Parker, whose background includes restructuring the Harland and Wolf shipyard. The other non-execs have a mix of backgrounds including retail, advertising, casinos and consumer goods.

I analyse management teams from five different angles to help work out a verdict. Here's my assessment:

   
1. ReputationManagement CVs and track record.

Good.

Score 3/5

2. PerformanceSuccess at the company.

Underperformed, safety questions.

Score 2/5

3. Board CompositionSkills, experience, balance

Combined chairman and CFO; no FD; entrenched management.

Score 1/5

4. Remuneration. Fairness of pay, link to performance.

Unable to locate remuneration report.

Score 2/5

5. Directors' Holdingscompared to their pay.

Execs are expected to hold three times base salary.

Score 4/5

Overall, Carnival scores 12 out of 25, a low result. This may be a case of "two countries divided by a common language," but governance arrangements look weak from a British perspective.

I've collated all my FTSE 100 boardroom verdicts on this summary page.

Buffett's favorite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His latest acquisition, Heinz, has long had a reputation for strong management. Indeed Buffett praised its "excellent management" alongside its high-quality products and continuous innovation.

So I think it's important to tell you about the FTSE 100 company in which the billionaire stock picker has a substantial stake. 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.

Buffett rarely invests outside his native United States, which makes this British blue chip -- and its management -- all the more attractive. So why not download the report today? It's free and comes with no further obligation.

link


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  • Report this Comment On May 25, 2013, at 1:40 PM, CruiseCritic666 wrote:

    It is interesting to find this one the Cruise Critic website, a cruising forum ruined also by mismanagement and over moderation.

    Once informed posters have been chased off their site, and punishments are regularly made if you even challenge thier operations.

    Once a good source for cuising information, they have been left in the dust, and are even fearful of Facebook.

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