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 AMEC (LSE: AMEC), which provides consultancy, engineering, and project management services to the energy and natural resources sectors.
Here are the key directors:
|
Director |
Position |
|---|---|
|
John Connolly |
(non-exec) Chairman |
|
Samir Brikho |
Chief Executive |
|
Ian McHoul |
Finance Director |
Shortchanged
John Connolly spent his executive career at Deloitte, initially in corporate finance roles, rising to be global chairman between 2007 and 2011. Deloitte enjoyed strong growth and success under his leadership. But Connolly had been AMEC's chairman for just 12 months when, in June 2012, he also took up the chairmanship of G4S after the previous incumbent left in the wake of G4S's failed megabid for a Danish cleaning company.
He was immediately confronted with G4S's Olympic scandal, which goes to prove how quickly and unexpectedly a FTSE 100 chairmanship can become a full-time job. I think AMEC shareholders might feel a bit shortchanged.
Three-bagger
Samir Brikho was a divisional head of Swedish-Swiss engineering giant ABB when he was headhunted to run AMEC in 2006. The Lebanese-born Swede, who is fluent in five languages, had spent his earlier career with ABB's Swedish predecessor ASEA and French engineer Alstom.
Brikho refocused AMEC away from engineering and construction into a service provider with a wide geographic footprint. During his tenure, the share price has more than tripled, with earnings per share rising nearly fourfold.
Ian McHoul has been finance director since 2008. A chartered accountant, he previously spent 20 years in the brewing industry, at Fosters and Scottish and Newcastle where he was finance director.
Boardroom bust-up
Last Autumillion, AMEC scrapped its divisional structure, eliminating the position of chief operating officer held by Neil Bruce. Bruce, who apparently had a difference of opinion with Brikho over the reorganization and strategy (according to the Financial Times) had been seen as the most likely internal candidate to succeed Brikho. A board member since 2009, he had been with AMEC since 1997. Arguably, Bruce's departure leaves a hole in the board. At least its non-execs are drawn from relevant sectors.
AMEC's remuneration report was nearly voted down in 2009 over a proposed 13% increase in Brikho's pay, but shareholders have since been assuaged by the company's performance. Brikho and McHoul have 19 million pounds' and 3 million pounds' worth of shares, respectively.
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. Very good. |
Score 4/5 |
|
2. Performance. Success at the company. |
Score 5/5 |
|
3. Board Composition. Skills, experience, balance |
Score 2/5 |
|
4. Remuneration. Fairness of pay, link to performance. |
Score 3/5 |
|
5. Directors' Holdings, compared to their pay. |
Score 5/5 |
Overall, AMEC scores 19 out of 25, a good result. Performance under the long-serving CEO has been excellent, and the executive directors have big stakes in the business. But a boardroom bust-up and a "two-timing" chairman point to the danger of being overly reliant on one individual.
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.
And Buffett, don't forget, rarely invests outside his native U.S., 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.
