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 recent weeks, I've assessed the boardrooms of five companies within the FTSE 100: Bunzl (BNZL 1.11%), Compass Group (CPG 0.36%), Kingfisher (LSE: KGF), Reed Elsevier (REL -1.75%), and Wolseley (LSE: WOS). Today, I am going to summarize what I found.
Five FTSE boardrooms
I analyze management teams from five different angles, giving each a score out of five. Here's my overall assessment:
| Company | Reputation | Performance | Composition | Remuneration | Shareholdings | Overall Score |
|---|---|---|---|---|---|---|
| Bunzl | 3 | 5 | 3 | 3 | 5 | 19 |
| Compass Group | 4 | 4 | 3 | 3 | 5 | 19 |
| Kingfisher | 3 | 4 | 4 | 3 | 2 | 16 |
| Wolseley | 3 | 4 | 2 | 3 | 4 | 16 |
| Reed Elsevier | 3 | 3 | 3 | 2 | 2 | 13 |
In this group, Bunzl and Compass Group distinguish themselves with substantial directors' shareholdings.
Acquisitions
Bunzl has been though several manifestations, but since Michael Roney became CEO in 2005, its business has been in distribution of low-value products, from coffee cups to cleaning fluids. Roney has taken Bunzl's niche specialism and rolled it out globally, with more than 60 acquisitions. That's led to steady profit progression and a 150% rise in the share price.
Roney has 4 million pounds' worth of shares, and the other executives have around 1.5 million pounds each.
Compass' CEO Richard Cousins has been in the role since 2006. A planner by background, he sits on a board where the chairman and three executive directors are all accountants. However, the bean-counter bias hasn't held back Compass, whose shares have tripled under Cousins' stewardship. The company has just lost James Crosby, who resigned as a non-executive in the wake of criticism of his role at HBOS.
Kingfisher is docked a point for the lack of investment by its directors. Though CEO Ian Cheshire has a substantial 3.8 million pounds' worth, two long-serving divisional directors have much smaller holdings and sold substantial holdings last year. That's not much commitment for a company that has cut costs in a harsh economic environment and that should be well-positioned for an economic upturn.
Busy chairmen
Wolseley has Gareth Davis, the previous CEO of Imperial Tobacco who led it for 14 years, as its chairman. But with two FTSE 250 chairmanships in addition, they might not see much of him. CEO Ian Meakins was parachuted in as CEO in 2009 to turn around the company, and his success in stabilizing it has been rewarded with a doubling of the share price.
Reed Elsevier also has a busy chairman in Anthony Habgood -- he does the same job at FTSE 100 member Whitbread. Reed's board has been somewhat troubled, with Hapgood sacking the CEO of nine months soon after his appointment in 2009. The long-serving FD was ousted last November. Reed is burdened with a complex board structure, in which the same people are members of three boards. There must be a lot of paper shuffling.
I've collated all my FTSE 100 boardroom verdicts on this summary page, and you can read more about each company by following the relevant links. I hope my research can assist your investment decisions.
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.
