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 AMEC (LSE: AMEC), which provides consultancy, engineering and project management services to the energy and natural resources sectors.
Here are the key directors:
|John Connolly||(non-exec) Chairman|
|Samir Brikho||Chief Executive|
|Ian McHoul||Finance Director|
John Connolly spent his executive career at Deloitte, initially in corporate finance roles, rising to be Global Chairman between 2007 and 2011. Deloitte enjoyed strong growth and success under his leadership. But Mr Connolly had been AMEC's chairman for just 12 months when, in June 2012, he also took up the chairmanship of G4S after the previous incumbent left in the wake of G4S's failed mega-bid for a Danish cleaning company.
He was immediately confronted with G4S's Olympic scandal, which goes to prove how quickly and unexpectedly a FTSE 100 chairmanship can become a full-time job. I think AMEC shareholders might feel a bit short-changed.
Samir Brikho was a divisional head of Swedish-Swiss engineering giant ABB when he was headhunted to run AMEC in 2006. The Lebanese-born Swede who is fluent in five languages had spent his earlier career with ABB's Swedish predecessor ASEA and French engineer Alstom.
Mr Brikho refocused AMEC away from engineering and construction into a service-provider with a wide geographic footprint. During his tenure the share price has more than tripled, with earnings per share rising nearly four-fold.
Ian McHoul has been finance director since 2008. A chartered accountant, he previously spent 20 years in the brewing industry, at Fosters and Scottish and Newcastle where he was finance director.
Last Autumn AMEC scrapped its divisional structure, eliminating the position of chief operating officer held by Neil Bruce. Mr Bruce, who apparently had a difference of opinion with Mr Brikho over the reorganisation and strategy (according to the Financial Times) had been seen as the most likely internal candidate to succeed Mr Brikho. A board member since 2009, he had been with AMEC since 1997. Arguably Mr Bruce's departure leaves a hole in the board. At least its non-execs are drawn from relevant sectors.
AMEC's remuneration report was nearly voted down in 2009 over a proposed 13% increase in Mr Brikho's pay, but shareholders have since been assuaged by the company's performance. Mr Brikho and Mr McHoul have £19m and £3m-worth of shares respectively.
I analyse management teams from five different angles to help work out a verdict. Here's my assessment:
|1. Reputation. Management CVs and track record.|
|2. Performance. Success at the company.|
|3. Board Composition. Skills, experience, balance|
Risks being something of a one-man band.
|4. Remuneration.Fairness of pay, link to performance.|
|5. Directors' Holdings, compared to their pay.|
Overall, AMEC scores 19 out of 25, a good result. Performance under the long-serving CEO has been excellent, and the executive directors have big stakes in the business. But a boardroom bust-up and a 'two-timing' chairman point to the danger of being overly-reliant on one individual.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
Buffett's favourite FTSE share
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