What you need to know about the tobacco group'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 British American Tobacco (LSE: BATS) (NYSE: BTI.US), the world's second largest quoted tobacco company.
The key directors are:
|Richard Burrows||(non-exec) Chairman|
|Nicandro Durante||Chief executive|
|Ben Stevens||Finance director|
|John Daly||Chief operating officer|
Richard Burrows joined the board and became chairman in late 2009. His executive career was spent with Pernod Ricard subsidiary Irish Distillers where he was CEO from 1978 to 2000, following which he served as deputy chief executive of Pernod Ricard itself until 2005.
However, his appointment to BATS was controversial as during the period from 2005 to 2009 he was governor (chairman) of the Bank of Ireland, apologising to shareholders on his resignation for the near total collapse in value of their shares when the bank had to be rescued by the Irish government. One of BATS's top shareholders, Standard Life (LSE: SL), publicly expressed disquiet.
Hardly fighting shy of controversy, he has recently become a non-executive director of FTSE 100 miner Eurasian Natural Resources Corp (LSE: ENRC) as it struggles to shed its abysmal corporate governance record.
In contrast, Nicandro Durante eased smoothly into the post of CEO in March 2011, having previously served as chief operating officer from 2008. He had joined the Brazilian subsidiary of BATS in 1981, working in various finance and regional management roles. As CEO he has continued his predecessor's strategy of growth in developing markets and emphasis on productivity and shareholder value.
Ben Stevens joined BATS in 1990 and has performed a variety of finance, marketing and management roles, becoming finance director in 2008. With a background in marketing, chief operating officer John Daly spent 14 years in the pharmaceutical industry before joining Rothmans (now part of BATS) in 1994. He served in various marketing and management roles before taking up his current position in 2010.
There are eight non-execs on the board with a broad spectrum of experience.
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. |
|2. Performance. Success at the company. |
|3. Board composition. Skills, experience, balance |
|4. Remuneration. Fairness of pay, link to performance. |
|5. Directors' holdings, compared to their pay. |
Execs have £2m-£7m holdings, in accord with company guidelines
Overall, BATS scores 17 out of 25, one of the better FTSE 100 management teams. Management oversight is a critical issue as the three executives are long-term BATS employees and the FD is not from the profession. Weight of numbers of non-execs helps, but the chairman's reputation isn't unblemished.
I've collated all my FTSE 100 boardroom verdicts on this summary page. I hope it will help with your analysis.
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> Tony does not own any shares mentioned in this article.