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 ITV (LSE:ITV), the U.K.'s largest commercial television network, which is two years into a five-year turnaround plan.
Here are the key directors:
|Archie Norman||(non-exec) Chairman|
|Adam Crozier||Chief Executive|
|Ian Griffiths||Finance Director|
For a 2.8 billion-pound company in the lower reaches of the FTSE 100, ITV has an impressively well-known board.
The company's shares rose 5% on the day Archie Norman's appointment as chairman was announced, a position he took up on 1 January 2010, replacing executive chairman Michael Grade who had started ITV's turnaround. A former McKinsey consultant, Archie Norman was finance director of Kingfisher at 32 but is best known for turning around supermarket group ASDA before selling it to Walmart.
He subsequently served as a Conservative MP for five years and was Chief Executive of the Tory Party and a shadow minister. He now has a portfolio of directorships and advisory roles.
Norman moved swiftly to fill the vacant CEO post with the appointment of Adam Crozier in April 2010. He had risen through the ranks of advertising agency Saachi and Saachi before being a surprise appointment as CEO of the Football Association in 2000, where his restructuring lowered the average age of its employees from 55 to 32.
He left the FA in 2002 to be CEO of loss making Royal Mail, where he transformed operating profits with ruthless closures and cost-cutting. However the turnaround was incomplete when he left to take up the ITV job, and his critics question whether he will stay the course to fully implement his five-year turnaround plan for ITV.
So far, that plan of replacing senior management, cost-cutting, and reducing dependency on advertising revenue by investing in content, pay-TV, and the Internet is paying off well. Profits and dividends have been restored and the balance sheet repaired.
Some of that improvement in cost discipline had started after Ian Griffiths was appointed finance director in 2009. He joined from media group Emap, where he was finance director from 2005 to 2008, having joined the company in 1994 after a period in the accounting profession.
ITV's weighty non-execs include Andy Haste, who as CEO of RSA Insurance was credited with turning it around, Tesco's long-serving corporate affairs director Lucy Neville-Rolfe, the former CEO of BAA and HM Revenue and Customs, and the former CEO of EMI.
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.
Excellent so far.
|3. Board Composition. Skills, experience, balance
|4. Remuneration. Fairness of pay, link to performance.
|5. Directors' Holdings, compared to their pay.
Crozier has less that 20% of his 2011 cash remuneration in shares.
Overall, ITV scores 19 out of 25, a very strong result let down by the lack of cash commitment on the part of the CEO responsible for the company's turnaround plan. Shareholders will be hoping he stays the course to deliver on the plan.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
Buffett's favorite FTSE share
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