What you need to know about the oil group's top executives.
In this series, I'm assessing the boardrooms of companies within the FTSE 100 (UKX). Management can make all the difference to a company's success and thus its share price.
My first piece looked at the board of Barclays (LSE: BARC) as it was thrust into the Libor rate-fixing scandal. Today I am looking at BP (LSE: BP), which dealt with its own major crisis, the Gulf of Mexico disaster, in 2010.
As BP manoeuvres and negotiates with the multitude of interested parties over the future of its Russian joint venture TNK-BP, shareholders will need to rely on a cool and collected board. BP's interest is estimated at around £20bn or so, a quarter of the company's market cap, and it accounts for 30% of BP's production.
Here are the key directors:
|Carl-Henric Svanberg||(Non-exec) chairman|
|Robert Dudley||Chief executive|
|Brian Gilvary||Chief financial officer|
|Ian Conn||Chief executive, refining and marketing|
|Byron Grote||Vice president, corporate business activities|
BP has four full-time executive directors, in contrast to many FTSE 100 companies which have only two: CEO and finance director. In addition it has 10 non-exec directors, making a total board of 15. It includes two women: this series is barely mis-titled as 'The Men Who Run...'
Carl-Henric Svanberg became chairman on 1 January 2010. He is the former CEO of Ericsson and was seen by many as a relatively light-weight appointment. His predecessor, Peter Sutherland, was a former Irish attorney general and European Commissioner with an impressive CV of international business and NGO roles.
Svanberg was also criticised for his low-key involvement when the Gulf of Mexico disaster struck, and for additionally taking on the chairmanship of Volvo in his native Sweden at the end of 2011. Some analysts though it was a sign he would ease out of the BP role.
Bob Dudley took over the reins after Tony Hayward resigned in the wake of the Gulf oil spill. Hayward was seen by many as working to fix the excessive cost-cutting and dictatorial style that characterised the era of his predecessor, Lord Browne, which was identified as a root cause of BP's poor safety culture.
Dudley has been in post just nine months, so it's too soon to assess his performance. But it looks as if his tenure will be characterised by big deals. A veteran American oil man who has worked extensively in Russia, he was credited with boosting TNK-BP's output by a third while serving as its CEO. And he wasn't shy of confrontation. In the sometimes wild and dangerous world of Russian big money, he was forced to leave the country but ran the JV from abroad for five months.
Brian Gilvary is a career BP man, in contrast to most FTSE 100 finance directors who served time in the accounting profession. The other two executive directors have similar backgrounds. The non-execs have a mixed background in business (other than oil), finance and engineering.
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. |
Svanberg may be lightweight for the job, Dudley is impressive.
|2. Performance. Success at the company. |
Early to judge, but Gulf crisis resolution and Russian deal looks promising
|3. Board composition. Skills, experience, balance |
Good mix of executive oil men and non-executive variety. FD not from the profession.
|4. Remuneration. Fairness of pay, link to performance. |
Multimillion payouts last year for 'turning around company', but generally not seen as excessive.
|5. Directors' holdings, compared to their pay. |
Executive directors all have substantial (£1m+) holdings
Overall, BP's board scores 16 out of 25 for me, which I think will put it in the top half of the FTSE 100.
The chairman perhaps doesn't have the weight, or political connections, that a global oil company needs. That could be a problem if things get sticky in Russia. And it would be reassuring to have a conventional FD. But overall the board gives the impression of being a group of people who know how to run the business.
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> Tony does not own any shares mentioned in this article.