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 Old Mutual
Here are the key directors:
|Patrick O'Sullivan||(non-exec) Chairman|
|Julian Roberts||Chief Executive|
|Philip Broadley||Finance Director|
Patrick O'Sullivan joined the board as chairman in 2010. A chartered accountant, he was formerly finance director and a divisional CEO at Zurich Insurance and has worked at Bank of America, Goldman Sachs, GE Capital, Barclays, and Eagle Star Insurance.
Julian Roberts joined Old Mutual as finance director in 2000, becoming CEO of Skandia following its purchase by Old Mutual in 2006, and becoming group CEO in 2008. He had previously been finance director at insurers Sun Life and Aon U.K. and has spent most of his career in the insurance sector after a brief stint at PricewaterhouseCoopers.
He has done much to restructure Old Mutual since it was badly hit by the financial crisis of 2007-08. Though knocked back by HSBC's walking away from a deal to purchase its stake in South African bank Nedbank, he has implemented a series of disposals including the group's Nordic business for $2 billion, cut costs, and paid down debt. He has also expanded the group's emerging African insurance businesses.
Philip Broadley became finance director in November 2008, having previously been finance director of Prudential. A former partner in Arthur Andersen, he has held a number of prestigious accountancy posts, including chairmanship of the 100 Group of FTSE 100 finance directors and membership of the IASB's insurance working group.
Both Julian Roberts and Philip Broadley took home sizeable pay packets last year, reflecting Old Mutual's stock market performance. It would be more encouraging had they retained their awards under long-term incentive schemes in shares. Instead, Julian Roberts sold more than 5 million pounds' worth of shares earlier this year, while Philip Broadley sold 1 million pounds' worth last year. However, they still have respectable holdings.
The company's nine non-executives include a smattering of accountants, bankers, actuaries, and insurers, including a number of South African-based individuals.
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.
Strong and varied industry experience.
2. Performance. Success at the company.
3. Board Composition. Skills, experience, balance.
4. Remuneration. Fairness of pay; link to performance.
High-ish, but performance-related.
5. Directors' Holdings, compared with their pay.
Overall, Old Mutual scores 17 out of 25, a result just slightly above average. The company's executives are doing a decent turnaround job, but share sales suggest they are not betting their fortunes on further upside.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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Tony Reading owns shares in HSBC, but no other shares mentioned in this article. The Motley Fool owns shares of Bank of America. Motley Fool newsletter services have recommended buying shares of Goldman Sachs. We Fools don't 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. The Motley Fool has a disclosure policy.