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: Admiral Group (LSE: ADM ) , Babcock International (LSE: BAB ) , Capita (LSE: CPI ) , InterContinental Hotels (LSE: IHG ) and Legal & General (LSE: LGEN ) .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 to make a maximum score of 25. Here's my overall assessment:
| Admiral | 4 | 5 | 3 |
| Babcock | 3 | 5 | 4 |
| InterContinental Hotels | 4 | 3 | 3 |
| Legal & General | 3 | 3 | 3 |
| Capita | 3 | 3 | 1 |
| Admiral | 4 | 4 | 20 |
| Babcock | 3 | 5 | 20 |
| InterContinental Hotels | 3 | 4 | 17 |
| Legal & General | 3 | 4 | 16 |
| Capita | 3 | 3 | 13 |
A tale of two start-ups
Admiral is one of those few companies that have grown from a start-up to an FTSE 100 member under the same management. CEO Harry Engelhardt and chief operating officer David Stephens were both in at the beginning in 1993. They have below-market remuneration and multimillion-pound shareholdings to align their interests with investors. A well-qualified chairman and nonexecutive team provide checks and balances to the entrenched management.
Like Admiral, public-sector outsourcer Capita grew from a start-up to an FTSE 100 company with members of the current management, but the similarity stops there. The CEO and finance director have been with the company since its formation in the 1980s, though the company lost founder Sir Rodney Aldridge in 2006 when it emerged that he had secretly lent £1 million to the Labor Party.
Whereas Admiral has established the best of corporate-governance practices, Capita contravenes the Governance Code by having a majority of executive directors, which it justifies by the "complexity" of its business. It previously had an executive chairman and appointed a nonexec from the executive ranks. Perhaps it's no coincidence that Capita's directors have few cross-directorships with other FTSE boards.
Ten-bagger
Babcock has a relatively long-serving CEO. Peter Rogers has been at the helm since 2003. He has grown the company organically and through acquisition, increasing the market cap from £150 million to £4 billion and multiplying the share price 10 times. It's a clever board, with the four executives having respective qualifications in accountancy, surveying, engineering, and law. With half its business coming from the Ministry of Defense, the presence of the former U.K. Security and Intelligence Coordinator must be a great help.
InterContinental Hotels' CEO has only been in the role since 2011 but has worked for the company and its predecessors since 1992 and was finance director for eight years. He looks a safe pair of hands, but the chairman and other executives are also relatively new in their current roles. The executives have substantial shareholdings.
Legal & General has announced a new management structure since my review last week. It has appointed one of the divisional directors to the finance director vacancy. However, the CEO has only been in the role since June of last year, having been finance director previously, and his overseas expansion strategy has yet to be tested. The board is almost entirely composed of people with finance-sector or finance-director backgrounds.
I've collated all my FTSE 100 boardroom verdicts on this summary page, and you can read more by following the individual company links.
Buffett's favorite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His recent acquisition, Heinz, has long had a reputation for strong management. Indeed, Buffett praised its "excellent management," as well as its high-quality products and continuous innovation.
So 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 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.
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