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 Legal & General (LSE:LGEN), the U.K.'s second-largest life and pensions company.
Here are the key directors:
|John Stewart||(non-exec) Chairman|
|Nigel Wilson||Chief Executive|
|Mark Gregory||Executive Director (Savings)|
|John Pollock||Executive Director (Risk)|
|Mark Zinkula||Executive Director (LGIM)|
John Stewart became chairman in March 2010, when L&G was still reeling from the impact of the financial crisis. He started his career with Woolwich Building Society, working his way up to become CEO.
After selling Woolwich to Barclays he became Barclays' deputy CEO. He was credited with turning around National Australia Bank, which he ran from 2004 to 2008. He is a member of the Court of the Bank of England.
Nigel Wilson was appointed finance director in September 2009. Previously he was deputy CEO and finance director of UBM. His previous career included management roles at Dixons and Guinness Peat Aviation, and consultancy with McKinsey.
He stepped up to the CEO role in June last year, replacing Tim Breedon, who had been CEO for seven years and an employee for 25. Wilson plans to grow the business, which is in a mature industry, through bolt-on acquisitions and is interested in overseas expansion, especially in Asia.
Indicative of that, the interim CFO was appointed Group M&A director last January. The search for a new finance director is ongoing.
Mark Gregory held several divisional finance director roles before joining the board in 2009. He joined the group in 1998 after working for Kingfisher and ASDA. John Pollock is a longer-serving company man, joining L&G in 1980, and the board in 2003.
Mark Zinkula was appointed to the group board in 2012, but he had been CEO of L&G Investment Management since 2011. He joined LGIM's U.S. arm at its inception in 2006 and became head in 2008. He previously was head of fixed income at Aegon Asset Management. His appointment to the group board was explicit recognition of LGIM's importance in L&G's international expansion strategy.
L&G's seven non-execs almost exclusively have financial services or finance director backgrounds.
LGIM has become one of the most vocal fund managers opposed to excessive boardroom pay. Breedon's £9 million payoff last year seems to have been uncontroversial, however. Executives have substantial shareholdings, though the formal requirement for a "voluntary shareholding of 50% of base salary" is weak.
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.
Too soon to judge CEO.
|3. Board Composition. Skills, experience, balance
|4. Remuneration. Fairness of pay, link to performance.
|5. Directors' Holdings, compared to their pay.
Overall, L&G scores 16 out of 25, a middling result. The company has recovered well from its distress in the financial crisis, and the new CEO's plans look credible, but it's too soon to tell how successful they may be.
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 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.
Tony does not own any 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.