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 mining group Anglo American (AAL -3.96%).
Here are the key directors:
|
Director |
Position |
|---|---|
|
Sir John Parker |
(non-exec) Chairman |
|
Cynthia Carroll |
Chief Executive until 2nd April |
|
Mark Cutifani |
Chief Executive from 3rd April |
|
René Médori |
Finance Director |
Only last September I profiled the four women running FTSE 100 companies. Once Cynthia Carroll is replaced in April their numbers will have been halved. Though credited with successfully restructuring Anglo's sprawling operations after she took over as CEO in 2007, her position was looking vulnerable when I wrote that article.
Investors were dissatisfied with a share price down a third during her tenure, and Anglo's South American projects have been dogged with problems, including massive cost over-runs in Brazil and messy deal-making in Chile.
Engineers
Chairman Sir John Parker stood up strongly for Carroll, so it must undermine his authority somewhat that investors forced a change of CEO. Sir John is a veteran though, who has chaired five FTSE 100 boards, and his counsel at Anglo must be valuable. An engineer with a background in shipbuilding, he successfully restructured Belfast's Harland and Wolf shipyard and defense contractor Babcock as chairman and CEO. He stepped down from the chairmanship of National Grid a year ago.
Incoming CEO Mark Cutifani brings two crucial areas of expertise that might stand him in better stead than Carroll, and which made him the leading candidate well before his appointment was announced. Currently CEO of AngloGold Ashanti, the former gold assets of Anglo American, he is also president of the South African Chamber of Mines and can steer through the tricky politics and labor relations of the country better than most.
And he is a mining engineer with hands-on experience, including having been chief operating officer of Brazilian Vale's nickel mining operations. His appointment was greeted with a 2% rise in the share price, matching the rise which accompanied the announcement of Cynthia Carroll's exit.
Finance
Finance director René Médori joined the board in 2005, and so handled the restructuring during Carroll's era. He was previously finance director of BOC Group. He is currently a non executive director of FTSE 100 Petrofac, and until June last year was a non exec at SSE. Fewer than one in four FTSE 100 finance directors find time to serve on other FTSE boards, and the job at Anglo is possibly one of the less straightforward.
Anglo's eight non-executives bring a variety of experience to the table, though surprisingly only one of them has any background in mining.
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. |
Score 4/5 |
|
2. Performance. Success at the company. |
Score 2/5 |
|
3. Board Composition. Skills, experience, balance |
Score 3/5 |
|
4. Remuneration. Fairness of pay, link to performance. |
Score 3/5 |
|
5. Directors' Holdings, compared to their pay. |
Score 4/5 |
Overall, Anglo scores 16 out of 25, a middling result, but one which might creep upwards as the new CEO gets his feet under the desk.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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.
And Buffett, don't forget, rarely invests outside his native United States, which to my mind makes this British blue chip -- and its management -- all the more attractive. So why not download the report today? It's totally free and comes with no further obligation.
