What you need to know about the bank’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. 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 RBS (LSE: RBS), 82% owned by the UK taxpayer. I've collated all my FTSE 100 boardroom verdicts so far on this summary page.
Here are the key RBS directors:
|Sir Philip Hampton||(non-exec) Chairman|
|Stephen Hester||Chief Executive|
|Bruce van Saun||Finance Director|
A former accountant and M&A deal-maker, Sir Philip Hampton was finance director at a string of blue chip companies from 1990 to 2004, finally at Lloyds (LSE: LLOY). He then became chairman of Sainsbury (LSE: SBRY) before becoming chairman of UK Financial Investments after the banking meltdown in 2008, but was parachuted in to chair RBS when former Standard Chartered (LSE: STAN) chairman Mervyn Davies became unavailable.
Stephen Hester took over from the disgraced Fred Goodwin in 2008. His background is in banking, with Credit Suisse and Abbey National, but at the time he was CEO of British Land (LSE: BLND). He has a reputation as something of a bruiser, perhaps appropriate for such a tough turnaround job.
Bruce van Saun, an American banker, was appointed in 2009, having previously been CFO of Bank of New York Mellon.
There are 9 non-executive directors, with backgrounds in banking, insurance, accountancy and industry, including Sir Sandy Crombie, former CEO of Standard Life (LSE: SL)
Remuneration has been controversial, with the board reported as threatening to resign to defend Hester's £1m bonus last year, which he eventually gave up. He has also given up this year's bonus over RBS's recent IT meltdown.
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.
Solid top three.
2. Performance. Success at the company.
Massive turnaround required, progress has been modest.
3. Board Composition. Skills, experience, balance
4. Remuneration. Fairness of pay, link to performance.
CEO gave up bonuses only after public scandals; FD hasn't.
5. Directors' Holdings, compared to their pay.
Hester has £1m worth, rest negligible.
Overall, RBS scores 10 out of 25, the lowest score of companies within the FTSE 100 that I have looked at so far.
The chairman told investors at the AGM in May that they may never recoup losses made before the bank's nationalisation. Yet he has less than £60k of his own money in RBS shares, probably less than many of those private shareholders, and hardly a vote of confidence in the bank's prospects for recovery.
Hester's last year's intended bonus was justified by his 'de-risking' the bank, but with the government threatening to fully nationalise the bank and a succession of crises including the IT crash, the board's preoccupation with management reward seems misplaced.
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Let me finish by adding legendary investor Warren Buffett has always looked for appealing management teams when pinpointing which shares to buy. So I think it's important to tell you that the billionaire stock-picker has recently acquired a substantial stake in a prominent FTSE 100 company.
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> Tony has shares in Standard Chartered but no other shares mentioned in this article. The Motley Fool owns shares in Standard Chartered.