What you need to know about the insurer's top executives.
Management can make all the difference to a company's success and thus its share price.
To me at least, 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. On the other hand, 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 Aviva (LSE: AV), the only composite insurer in the FTSE100.
Aviva's board hasn't been covered in glory recently. Former CEO Andrew Moss was ousted in the UK's 'Shareholder Spring' which saw a spate of overpaid and under-performing executives embarrassed into resigning by shareholder revolts. A new CEO is not expected to be appointed until next year.
But his exit coincided with the appointment of a new chairman, who promptly assumed executive responsibilities. And last week he set a new direction for the company, with a new strategy, changed management, cost-cutting and disposals. So far from being rudderless whilst there is no CEO, Aviva's fate could be sealed in the interregnum. So it's timely to look at who's in charge now.
Here are the executive directors:
|John McFarlane||Executive chairman|
|Patrick Regan||Chief financial officer|
|Trevor Matthews||Executive director, developed markets|
John McFarlane was named as the future non-executive Chairman in 2011 when Aviva was hit by a rash of management departures.
A Scots-born former banker, he is credited with turning around the fortunes of Australia and New Zealand Bank (ANZ) whilst CEO for 10 years between 1997 and 2007, during which time its share price tripled. He slashed costs and refocused the bank’s strategy, lowering its risk profile by moving out of emerging markets, whilst at the same time restoring its public reputation.
He is also a former executive director of the respected Standard Chartered (LSE: STAN), and earlier in his career spent 18 years with Citibank (NYSE: C.US).
The disarray caused by Andrew Moss's departure led to Mr McFarlane taking on an executive role in May. That's a big change for a man who retired from executive responsibilities five years ago, but in the two months he has been in post he has moved quickly to make his mark.
Mr McFarlane's track record with ANZ augurs well for Aviva's latest attempt to re-invent itself. Significantly, he has appointed 46 year old rising star David McMillan to the post of director of transformation, reporting directly to him with the brief to implement the new strategy. That's perhaps a way for the 65 year old chairman to harness a younger man's energy.
Pat Regan joined the board as CFO in February 2010. He was previously CFO of Willis, the insurance broker, and group financial controller at insurers RSA and AXA. He is seen as the leading internal candidate to replace Andrew Moss, and looks a safe pair of hands in the arcane world of insurance accounting.
Trevor Matthews, the former CEO of life insurer Friends Life, joined the board in December 2011. His £2.5m signing on package was a factor in Aviva's shareholders rejecting its remuneration report for last year.
There are 8 non-executive directors. Perhaps most of note is that the chairman of the remuneration committee was appointed in 2009 and remains in situ.
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. |
Strong credentials in turnarounds, finance and insurance.
|2. Performance. Success at the company. |
Short tenure from all current executives.
|3. Board Composition. Skills, experience, balance |
Execs look good, but no CEO. Nothing striking about non-execs.
|4. Remuneration. Fairness of pay, link to performance. |
Positive indications, but no proof of a break from past excesses
|5. Directors’ Holdings, compared to their pay. |
Only Patrick Regan has any significant skin in the game
Overall, Aviva scores 11 out of 25 for me, putting the firm's management team low down in the FTSE 100. But it's a patchy result, which reflects the short tenure of the management team. In time they may rise up in the rankings. Aviva is a high risk turnaround story, and on paper Mr McFarlane is the right man for the job.
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Tony has shares in Aviva and Standard Chartered but no other stocks mentioned in this article.