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 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 oil services group Petrofac
Here are the key directors:
|Norman Murray||(Non-exec) chairman|
|Ayman Asfari||Chief executive|
|Tim Weller||Chief financial officer|
|Marwan Chedid||Chief executive, engineering|
|Andy Inglis||Chief executive, integrated energy services|
Norman Murray has been chairman since May 2011. He is a venture capitalist and was chairman of Cairn Energy for from 2002 to June 2011 in what was a highly successful period for that company.
Syrian-born Ayman Asfari joined the precursor to Petrofac as an equity partner in 1991, bought it out in 2001, floated it in 2005, and has since led its growth into a 5 billion pound company. Petrofac's success is synonymous with his own. Named as Ernst & Young's UK Entrepreneur of the Year in 2011, he has said that in future he would like to spend more time on his charitable foundation.
Maroun Semaan has been Ayman Asfari's business partner since 1991 and has served in various roles during that time. He is now responsible for corporate development and strategy.
Tim Weller was appointed finance director last October. He had previously been CFO of United Utilities for four years until May 2010 following which he served an unfortunate 14-month stint at Cable & Wireless Worldwide, departing with CEO Jim Marsh after that company's third profit warning in under 12 months.
A substantial shareholder, Marwan Chedid has been with the company since 1992 but was appointed to the board only this January. Andy Inglis is the former exploration and production director of BP, joining Petrofac's board in March 2011 after BP's Deepwater Horizon disaster.
There are five non-execs, making this another FTSE 100 board where it's only the chairman who puts the non-executives in a majority. They bring a mix of oil and gas, business, and finance experience.
I analyze management teams from five different angles. Here's my assessment:
1. Reputation. Management CVs and track record.
Weller's CWW stint is the only slight cloud.
2. Performance. Success at the company.
3. Board Composition. Skills, experience, balance.
Non-execs bare majority.
4. Remuneration. Fairness of pay, link to performance.
Base pay modest.
5. Directors' Holdings, compared to their pay.
Asfari owns 18% of company, Seeman 8%.
Overall, Petrofac scores an impressive 20 out of 25. Shareholders need only be concerned at the question of management succession if Ayman Asfari and his two long-standing colleagues decide to call it a day.
Petrofac's score takes it straight to the top of the leader board of FTSE 100 companies that I have looked at so far. I've collated all my FTSE 100 boardroom verdicts on this summary page.
Buffett's favorite FTSE share
Let me finish by adding legendary investor Warren Buffett has always looked for impressive management teams when pinpointing which shares to buy. So I think it's important to tell you that the billionaire stock picker has recently acquired a substantial stake in a prominent FTSE 100 company.
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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.