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 Standard Life (LSE:SL), the life assurer which is bucking the trend with a special dividend.
Here are the key directors:
|Gerry Grimstone||(non-exec) Chairman|
|David Nich||Chief Executive|
|Jackie Hunt||Finance Director|
|Keith Skeoch||Executive Director|
Gerry Grimstone has been chairman since 2007, the year after the former mutual society was floated, but had been a board member since 2003. He knows something about public-to-private ownership transfers, as a former civil servant in the Treasury, who was heavily involved in the early privatisations of the 1980s, such as British Airways. That led to a career in investment banking with Schroders, including vice-chairmanship of its global investment banking activities.
Accountant, not actuary
David Nish's involvement with Standard Life is also longer than his tenure in the top job. He had been appointed finance director in November 2006, shortly after demutualisation. He was promoted to the CEO role in 2010 on the retirement of Sir Sandy Crombie, who had worked at Standard Life throughout his career. Previously, Mr. Nish was finance director of Scottish Power, having qualified as a chartered accountant with PricewaterhouseCoopers.
Mr. Nish has been instrumental in revitalising Standard Life's staid culture and executing its "asset light" strategy, refocusing the business as a seller of savings and pension products rather than a traditional life assurer. Under his leadership, Standard Life's shares have risen by 85%, far above the FTSE, and even outperforming the mighty Prudential.
Jackie Hunt stepped up from the role of deputy finance director on Mr. Nish's promotion. She joined the company in 2009, after various finance roles with RSA and Aviva, having worked as an accountant with PricewaterhouseCoopers and Deloitte.
Keith Skeoch runs the investment arm of Standard Life. He has been a director since flotation, and was a potential internal candidate for the CEO's role. He joined Standard Life in 2009, after 20 years with brokers James Capel, including the role of chief economist.
Standard Life's eight non-execs have a broad spread of backgrounds.
I analyse 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
Strong exec team.
|4. Remuneration. Fairness of pay, link to performance.
On the high side, but not controversial.
|5. Directors' Holdings, compared to their pay.
Overall, Standard Life scores 19 out of 25, a very good result. The company has a strong executive team that is delivering results, and a sound bunch of non-execs. Notably for a life assurer, it has no actuaries on the board.
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, Mr. Buffett praised its "excellent management," alongside its high-quality products and continuous innovation.
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Tony owns shares in Aviva but no other shares mentioned in this article. 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.