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: ARM Holdings plc (ADR) (NASDAQ:ARMH), Carnival Corporation (LSE:CCL), CRH PLC (ADR) (LSE:CRH), EVRAZ plc (LON:EVR), and Serco Group plc (LON:SRP). 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:
This was a well-spread field. ARM Holdings plc (ADR) (NASDAQ:ARMH) stands out as one of the FTSE’s best-managed companies. It has a close-knit team, and they have driven the company from a small spin-off to the stock market darling of today. The non-execs have a predominantly technological background, which I guess they need if they’re to have oversight of the clever and geeky executives.
Long-serving CEO Warren East is leaving, being replaced by his long-standing lieutenant, following one of the founders who left last year. Shareholders might have slight concerns that the old guard are getting out at the top.
Christopher Hyman has presided over a fourfold rise in revenues, and a fivefold rise in profits during his 10 years as Serco Group plc (LON:SRP)’s CEO. One of just a few non-whites to study at South Africa’s Natal University during the Apartheid era, he has sought to carve out an ethical reputation for the group, and was described in the Guardian as “combining the zeal of Cliff Richard with the determination of Seb Coe.” He is one of five chartered accountants on Serco Group plc (LON:SRP)’s seven-strong board, a remarkably skewed skill set.
Three of the four executive directors of Irish building materials group CRH PLC (ADR) (LSE:CRH) are also accountants, including one of only six female finance directors in the FTSE 100. Unsurprisingly, the company has a reputation for strong financial discipline, which has served it well in the difficult environment since 2009, when current CEO Myles Lee stepped up from the finance director role.