What you need to know about the commodity producer’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 Glencore (LSE: GLEN) as it approaches the endgame in its bid for Xstrata (LSE: XTA).
Here are the key directors:
|Simon Murray||(non-exec) Chairman|
|Ivan Glasenberg||Chief Executive|
|Steven Kalmin||Finance Director|
Simon Murray was a surprise choice as chairman ahead of Glencore’s flotation in May 2011. The septuagenarian, who spent five years in the French Foreign Legion in his 20s, has spent most of his life in Hong Kong and was formerly managing director of Hutchinson Wampoa.
Supporters say that his independent and fearless nature empowers him to impose proper corporate governance on a company that was formerly owned by management. Detractors point to his strident views which included controversially telling the Sunday Telegraph that women prefer to bring up children rather than pursue careers.
Glencore’s inaugural AGM in Switzerland took only questions submitted in writing in advance, and was dubbed ‘Bulgarian style’ by the Financial Times.
Were the Xstrata deal to go ahead Simon Murray would relinquish his position.
Ivan Glasenberg joined Marc Rich & Co, Glencore’s predecessor, in 1984. The business was sold to management and renamed Glencore in 1994 after Marc Rich had been charged with tax evasion and illegal trading with Iran.
A natural trader and deal-maker, Glasenberg became CEO in 2002 and has driven the company's growth as a private enterprise through to its flotation last year and the current bid for Xstrata. He owns around 16% of the company worth nearly £4 billion. Known as a very private man, he raised his head above the parapet to defend high pay for entrepreneurial chief executives earlier this year.
He would serve as deputy CEO under Xstrata's Mick Davies if the companies merge.
Formerly a professional accountant, Steven Kalmin joined Glencore in 1999 and became CFO in 2005.
The five non-execs, led by Tony Hayward, former CEO of BP (LSE: BP.) (NYSE.BP.US), have backgrounds in natural resources and banking but look more entrepreneurial than ‘checks and balances’ types.
I analyse management teams from five different angles. Here's my assessment:
|1. Reputation. Management CVs and track record.|
Sound but unconventional.
|2. Performance. Success at the company.|
Not remarkable since flotation.
|3. Board Composition. Skills, experience, balance|
Strong individuals but narrow focus.
|4. Remuneration. Fairness of pay, link to performance.|
Criticised for excessive retention payment to keep Mick Davies post merger.
|5. Directors’ Holdings, compared to their pay.|
Execs have high holdings, but non execs less committed.
Glencore scores 12 out of 25, a relatively low score. With Glencore’s managers owning so much of the company, the non-execs do not look powerful or committed enough to hold the executives to account.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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> Tony owns shares in Xstrata but no other shares mentioned in this article.