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 Glencore (LSE: GLEN.L) as it approaches the endgame in its bid for Xstrata.
Here are the key directors:
|
Director |
Position |
|---|---|
|
Simon Murray |
(non-exec) Chairman |
|
Ivan Glasenberg |
Chief Executive |
|
Steven Kalmin |
Finance Director |
Simon Murray was a surprise choice as chairman ahead of Glencore's flotation in May 2011. The septuagenarian, who spent five years in the French Foreign Legion in his 20s, has spent most of his life in Hong Kong and was formerly managing director of Hutchison Whampoa.
Supporters say that his independent and fearless nature empowers him to impose proper corporate governance on a company that was formerly owned by management. Detractors point to his strident views, which included controversially telling the Sunday Telegraph that women prefer to bring up children rather than pursue careers.
Bulgarian style
Glencore's inaugural AGM in Switzerland took only questions submitted in writing in advance, and was dubbed "Bulgarian style" by the Financial Times.
Were the Xstrata deal to go ahead, Simon Murray would relinquish his position.
Ivan Glasenberg joined Marc Rich & Co, Glencore's predecessor, in 1984. The business was sold to management and renamed Glencore in 1994 after Marc Rich had been charged with tax evasion and illegal trading with Iran.
A natural trader and deal-maker, Glasenberg became CEO in 2002 and has driven the company's growth as a private enterprise through to its flotation last year and the current bid for Xstrata. He owns around 16% of the company worth nearly 4 billion pounds. Known as a very private man, he raised his head above the parapet to defend high pay for entrepreneurial chief executives earlier this year.
He would serve as deputy CEO under Xstrata's Mick Davis if the companies merge.
Formerly a professional accountant, Steven Kalmin joined Glencore in 1999 and became CFO in 2005.
The five non-execs, led by Tony Hayward, former CEO of BP, have backgrounds in natural resources and banking but look more entrepreneurial than "checks and balances" types.
I analyze management teams from five different angles. Here's my assessment:
|
1. Reputation -- Management CVs and track record. |
Score: 3/5 |
|
2. Performance -- Success at the company. |
Score: 2/5 |
|
3. Board Composition -- Skills, experience, balance |
Score: 2/5 |
|
4. Remuneration -- Fairness of pay, link to performance. |
Score: 2/5 |
|
5. Directors' Holdings -- compared to their pay. |
Score: 3/5 |
Glencore scores 12 out of 25, a relatively low score. With Glencore's managers owning so much of the company, the non-execs do not look powerful or committed enough to hold the executives to account.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
Buffett's favorite FTSE share
Let me finish by adding that 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.
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.
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.
Are you a sophisticated investor hoping to profit from this uncertain economy? We urge you to read "10 Steps to Making a Million in the Market" today -- your wealth could be transformed. Click here now to request your free, no-obligation copy. The Motley Fool is helping Britain invest. Better.
Further Motley Fool investment opportunities:
