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 IMI (LSE:IMI), the maker of fluid control valves for everything from nuclear power plants to drinks machines.
Here are the key directors:
|Robert Quarta||(non-exec) Chairman|
|Martin Lamb||Chief Executive|
|Douglas Hurt||Finance Director|
|Roy Twite||Executive Director|
Robert Quarta has been chairman since November 2011. He is a partner and European chairman of Clayton, Dubilier & Rice, the U.S. private equity firm that numbers Jack Welch and Terry Leahy among its advisors. He worked in an executive capacity with the firm from 2001. He was CEO of BBA Aviation from 1993 to 2001, subsequently moving up to be its chairman until 2007. He spent the previous 17 years in various positions in BTR. A slew of previous non-executive directorships include BAE Systems.
Martin Lamb has been CEO for 12 years. An engineer by training, he has spent most of his career with IMI, joining in 1986, and quickly moving into management and business development roles. He joined the board in 1996, responsible for the beverages-dispensing business.
On becoming CEO in 2001, he instituted a strategic review that led to substantial restructuring over the next few years. Diversified operations were sold off, manufacturing was relocated to low-cost countries, the business was focussed globally on product niches, and the balance sheet strengthened with debt reduction. The shares have quadrupled during his tenure.
A chartered accountant, Douglas Hurt joined IMI as finance director in 2006. After leaving the profession he worked at GlaxoSmithKline in finance and operational roles.
Roy Twite is a company man. He joined IMI's engineering graduate recruitment scheme in 1988, and worked his way up the company, running various divisional operations from 2001 onwards. He now has direct responsibility for two of IMI's more significant divisions. A second executive director, Ian Whiting, left last year, and has not been replaced.
IMI's non-executives have a broad range of backgrounds, not dominated by engineers. Phil Bentley, the Managing Director of British Gas. who is controversially getting a 10 million pounds pay-off on his departure from Centrica this year, was appointed in 2012.
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.
Excellent over a long period.
|3. Board Composition. Skills, experience, balance
|4. Remuneration. Fairness of pay, link to performance.
|5. Directors' Holdings, compared to their pay.
Three executives each have over £2m-worth of shares.
Overall, IMI scores 19 out of 25, a very good result. Shareholders have done well from a long-serving CEO, who fashioned IMI into what it is today.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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Fool contributor Tony Reading has no position in any stocks mentioned. The Motley Fool recommends GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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