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A Closer Look at 5 FTSE Boardrooms

By Tony Reading - Apr 2, 2013 at 7:33PM

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What you need to know about the boardrooms of Antofagasta, Fresnillo, Rexam, The Weir Group, and WPP.

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 recent weeks, I've assessed the boardrooms of five companies within the FTSE 100: Antofagasta (ANTO -0.17%)Fresnillo (FRES 1.32%)Rexam (REX)Weir Group (WEIR 1.60%) and WPP (WPP 1.31%). Today I am going to summarize what I found.

Five FTSE boardrooms
I analyze management teams from five different angles, giving each a score out of five to make a maximum score of 25. Here's my overall assessment:

 

Repu-
tation

Perform-
ance

Com-
position

Remun-
eration

Share-
holdings

Overall
Score

WPP

5

4

5

1

4

19

Rexham

4

4

4

3

4

19

Weir Group

2

4

4

3

4

17

Antofagasta

3

3

1

2

3

12

Fresnillo

4

3

0

3

1

11

Top spot
WPP and Rexam share top spot. WPP's chairman Sir Martin Sorrell is so well-known that its website barely bothers to provide a CV. Sir Martin created the company from virtually nothing by a series of audacious takeovers, and it's now one of three global players.

WPP also boasts a former U.S. ambassador to the U.K. and deputy White House chief-of-staff as its chairman. It's an impressive looking board all round. But Sir Martin's generous pay package-£13 million last year-is a sore point with investors.

Turnaround
Fewer investors are familiar with Rexam's CEO Graham Chipchase. But he's done a remarkable job of turning the packaging company around since he became CEO in 2010, a job dubbed a "poisoned chalice" at the time by one analyst. Shares have risen 70% on the back of asset disposals, cost cutting, and moves into emerging markets.

Weir has two members of the House of Lords on its nine-strong board, though Chairman Lord Smith of Kelvin is perhaps more occupied with his chairmanship of the much-bigger SSE and the new Green Investment Bank. Weir's shares have tripled since Keith Cochrane became CEO, though an earlier less successful spell at Stagecoach, together with a finance director in his first commercial role, gives the company a slightly under-average score for directors' reputation.

Miners
The two South American miners in the FTSE 100 score poorly. Both companies are family run firms but that doesn't necessarily equate to poor corporate governance, as companies such as Schroders and ABF testify.

Jean Paul Luksic, whose family owns 65% of Antofagasta, is its executive chairman. That means there's no separation of chairman and CEO roles, and no finance director with fiduciary responsibility to shareholders. The recently appointed CEO of Antofagasta's operational subsidiary is well-respected, but not being on the main board his first responsibility is to his employers, not shareholders.

Governance is even more an issue at Fresnillo, where its parent mining company Peñoles owns 77% of the shares and is thus able to enforce special company resolutions over the heads of minority shareholders. Fresnillo's chairman owns and controls Peñoles. Again there is no finance director, and the CEO is a company-man who's undertaken multiple roles in the Peñoles group.

I've collated all my FTSE 100 boardroom verdicts on this summary page, and you can read more about each company by following the relevant link. I hope my research can assist your investment decisions.

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 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.

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Stocks Mentioned

Antofagasta plc Stock Quote
Antofagasta plc
ANTO
$1,422.50 (-0.17%) $-2.50
Rexam Ltd. Stock Quote
Rexam Ltd.
REX
Fresnillo PLC Stock Quote
Fresnillo PLC
FRES
$784.40 (1.32%) $10.20
The Weir Group PLC Stock Quote
The Weir Group PLC
WEIR
$1,489.00 (1.60%) $23.50
WPP plc Stock Quote
WPP plc
WPP
$960.60 (1.31%) $12.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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