The Men Who Run G4S

Published in Company Comment on 16 July 2012

What you need to know about the security group's top executives.

FTSE100 (UKX) executives are dropping like flies.  Now G4S (LSE: GFS) is in the news for all the wrong reasons, after the company failed to train enough guards for the London Olympics.

G4S will lose up to £50m directly, but the reputational damage will harm future business. As I write, CEO Nick Buckles is hanging onto his job by a thread.

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. 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. I hope to separate the management teams that are worth following from those that are not. I've collated all my FTSE 100 boardroom verdicts on this summary page.

This is G4S's top team:

Director

Position

John Connolly

(non exec) Chairman

Nick Buckles

Chief executive

Trevor Dighton

Finance director

Grahame Gibson

COO and Regional CEO-Americas

John Connolly has only been in post since last month, after the previous chairman fell on his sword following G4S's failed £5bn bid for Danish cleaning services company ISS. 

He spent his career with Deloitte, acting as global chairman from 2007 to 2011, and played a key role in the firm's growth. he is also chairman of FTSE 100 oil services group AMEC (LSE: AMEC). Though new to G4S, Connolly brings credibility.

Number 1

Nick Buckles has been CEO since 2005. He has spent most of his career with G4S and its predecessor company Securicor, and can take much of the credit for the group's growth organically and by acquisition. He has led it through over 70 acquisitions, taking G4S from number 3 to number 1 in the global securities business, and becoming Europe's largest employer in the process.

The proposed acquisition of ISS dented his reputation. Shareholders objected to the size of the deal and the move into lower margin cleaning services, as well as the proposed equity dilution.

There is now the question of whether he will take the fall for the Olympics debacle. The chairman is too new to go, and being such an important contract the argument is that the CEO should take the blame. But his departure would be a loss to shareholders.

Trevor Dighton is a professional accountant who has spent 17 years with the group, the last 8 as CFO. COO Grahame Gibson has been with the group for 29 years and on the board for 7.

There are 6 non-executive directors who bring relevant experience and contacts, including former Metropolitan Police Commissioner Lord Condon and Ofgas director general Claire Spottiswoode.

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.

Connoly sound but new. Executives all long time insiders.

Score 2/5

2. Performance. Success at the company.

Two bad episodes mar a successful record.

Score 3/5

3. Board Composition. Skills, experience, balance

Good for contacts, light on control.

Score 3/5

4. Remuneration. Fairness of pay, link to performance.

Performance related remuneration with stretch targets. First FTSE 100 group to introduce claw-backs.

Score 4/5

5. Directors' Holdings, compared to their pay.

Exec directors have substantial shareholdings.

Score 4/5

G4S scores 16 out of 25, a decent if average result. But any more fallout from the Olympics contract would likely see Buckles go, and that would knock a couple of points off the score.

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> Tony does not own any shares mentioned in this article.

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Comments

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tru2me 16 Jul 2012 , 1:15pm

Tony good idea to add a summary page of FTSE 100 management(s).

jackdaww 18 Jul 2012 , 9:21am

useful info

thanks

sippquixote 18 Jul 2012 , 1:16pm

The generally quoted figure for the G4S contract for the Olympic Games is £284 million.
This is to provide 10,000 security guards for four weeks.

Some quick mathematics shows that this is £7100- per guard per week. Most of them, according to G4S, will be on minimum wage, less than £300- per week. Even after adding uniform cleaning, meals etc the total cost to G4S shouldn't be more than £500- per person per week.
The total profit for G4S will be £6600- per week per person. Even after deducting additional costs such as training and security checking it appears that it is an incredibly profitable contract.

Very wisely Mr. Buckles has been whining that G4S will lose a lot of money on this contract. I can't see how, but the civil servants who negotiated this contract will undoubtedly be sympathetic and give G4S additional tax payers' money.

Mr Buckles is sharp, I forecast a great future for him running a bank!

sippquixote 18 Jul 2012 , 3:54pm

Having just had today's copy of the Daily Telegraph pointed out to me, it appears from Hugh Robertson, Sports Minister, that the money has already been paid to G4S, but he says that he will try to recoup some. I assume that by the word "try" he means that there aren't any suitable penalty clauses.

I told you that Mr. Buckles was sharp. No payment for results, or stage payments in the Olympics contract, and apparently no penalty clauses, and money up front. Now there is a smart negotiator!

Great career, and great prosperity ahead for Mr. Buckles running one of the City's favourite banks.

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