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 Experian (LSE:EXPN), the provider of credit and marketing data.
Here are the key directors:
|Sir John Peace||Chairman|
|Don Robert||Chief Executive|
|Brian Cassin||Finance Director|
|Chris Callero||President and Chief Operating Officer|
Having worked for GUS (formerly Great Universal Stores) for 30 years, as CEO from 2000 to 2006, it was a logical move for him to become chairman of Experian and Burberry when they were spun off, though even that would presumably offend current corporate governance sensibilities. But it must be open to question how he also finds the time to chair a bank, and which company suffers if anything proverbial should hit the fan simultaneously at two companies.
CEO Don Roberts is also a former GUS director, and his appointment as Burberry's CEO predates its 2006 demerger. An American, he began his career in banking, moving into the credit checking field in 1995 at Credco and subsequently First American Corporation. He joined Experian in 2001 and was CEO of its North American division before becoming group CEO in 2005. That reflects the importance of North America to Experian: It generates nearly half of sales, and together with Latin America, the Americas region accounts for nearly three-quarters.
Roberts has been responsible for Experian's drive in to emerging markets, which has enabled growth outside the mature developed markets. Since demerger, the share price has risen 84%, against a flat FTSE 100.
Finance director Brian Cassin joined in April 2012. He is a former investment banker rather than accountant, having worked in corporate finance advisory for 20 years at Greenhill and Baring Brothers. At Greenhill, he was a strategic advisor to GUS prior to Experian's demerger. He replaced former FD Paul Brooks, who had also been with Experian from its former GUS days, who died suddenly in January 2012. Clearly, the Experian team are a close-knit bunch.
Chris Callero joined the company in 2002 and was CEO of the Americas before assuming his present title in 2008. His background is in retail banking.
Experian's eight non-execs include former chief operating officers of HSBC and Barclays, together with a couple of former finance directors.
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
Good individuals but busy chairman and unqualified finance director.
|4. Remuneration. Fairness of pay, link to performance.
Investor protests in 2010, uncontroversial since.
|5. Directors' Holdings, compared to their pay.
Very large (despite sales last year).
Overall, Experian scores 16 out of 25, a middling to low result. The choice of a corporate financier historically associated with the company over a professional bean counter as FD, coupled with the long-service of the key executives and an over-busy chairman, potentially somewhat weakens the board's oversight of management.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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Tony owns shares in HSBC and Standard Chartered, but no other shares mentioned in this article. The Motley Fool owns shares in Standard Chartered and has recommended Burberry. 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.