What you need to know about the life insurer’s top executives.
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 (UKX). I hope to separate the management teams that are worth following from those that are not. Today I am looking at Prudential (LSE: PRU), the life assurance group that is going great guns in Asia.
Here are the key directors:
Chief Financial Officer
Chief Risk Officer
Prudential has no less than 7 executive directors. The non-exec chairman and 7 other non-execs just put the executive team into a minority, in line with corporate governance codes. It’s something of an old-fashioned structure, with many FTSE 100 boards having just the CEO and CFO on the board.
Chairman Paul Manduca's appointment earlier this month was controversial. A non-exec since 2010, he was asked to lead the search for a new chairman after Harvey McGrath resigned in the wake of Prudential’s failed £23bn bid for AIA. A five month search led to the appointment of Manduca himself.
Manduca was formerly CEO of several large asset management firms, but was not wholly uncontroversial. He quit as European head of Deutsche Bank’s struggling asset management business in 2005 after a change of strategy.
A former McKinsey consultant, Ivory Coast government minister and European head of Aviva (LSE: AV.), Tidjane Thiam joined Prudential as CFO in 2008 and became CEO in 2009. He has continued predecessor Mark Tucker’s Asia strategy with great success. Reputed to have a brain the size of a planet, he might still consider himself lucky to have survived the failure of the AIA bid which many saw as over ambitious. He is to be the next chairman of the Association of British Insurers.
The CFO also joined from Aviva in 2009, with an insurance industry and professional finance background. The other directors have insurance, banking, business and public sector experience, and include heavyweights Sir Howard Davies, former chairman of the FSA, and Lord Turnbull, former cabinet secretary.
I analyse management teams from five different angles to arrive at a verdict:
1. Reputation. Management CVs and track record.
Chairman lightweight. CEO top flight.
2. Performance. Success at the company.
Strong strategy. Unfortunate AIA episode.
3. Board Composition. Skills, experience, balance
Weighty; may struggle to hold CEO in check.
4. Remuneration. Fairness of pay, link to performance.
30% of shareholders voted against executive remuneration scheme.
5. Directors’ Holdings, compared to their pay.
CEO has £14m worth of shares, other execs between £4m and £9m.
Overall, Prudential scores 15 out of 25, a middling result within the FTSE 100.
The individuals have impressive credentials, but an almost-too-good CEO needs more to hold him to account than a weak-ish chairman and a board half of which owe him their jobs.
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> Tony has shares in Aviva but no other shares mentioned in this article.