What you need to know about the food and retail 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. 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 Associated British Foods (LSE: ABF), the diversified food and retail group that is 55% owned by the Weston family which first established a bakery in Canada in 1882.
Here are the key directors:
|Charles Sinclair||(non-exec) Chairman|
|George Weston||Chief Executive|
|John Bason||Finance Director|
Much rests on the head of the Chairman in a group that is family controlled and whose CEO is a member of that family. Charles Sinclair was appointed to the board in 2008 becoming chairman in 2009. He should certainly be at home in this situation: for 21 years he was CEO of Daily Mail and General Trust (LSE: DMGT) which is controlled by the Rothermere family with a Rothermere as chairman. During that time DMGT’s profits increased tenfold.
George Weston has worked in the family firm since 1988 in various roles in the UK and Australia, joining the board in 1999 and becoming CEO in 2004. Both his father and grandfather ran the business before him. Whatever nepotism was involved in his appointment as CEO, it's hard to argue with the fact that ABF’s share price has more than doubled under his leadership, during which time the FTSE 100 has put on less than 30%.
A professional accountant, John Bason has been FD since 1999, prior to which he was finance director of FTSE 100 distribution group Bunzl (LSE: BNZL).
ABF five non-execs include one representative of the Weston family holding company. The other four have backgrounds in business, accountancy and the civil service.
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.|
Good and relevant.
|2. Performance. Success at the company.|
Strong over a significant period.
| Score 4/5|
|3. Board Composition. Skills, experience, balance|
|4. Remuneration. Fairness of pay, link to performance.|
Reasonable and performance related.
|5. Directors’ Holdings, compared to their pay.|
CEO’s £43m holding is irrelevant, but FD has £800k worth and chairman £200k.
Overall ABF scores 17 out of 25, which puts it in the top half of companies I have examined so far, and is a pretty impressive result considering ABF’s unusual ownership structure. Based on his experience in the group and success since becoming CEO, it would be fair to assume that George Weston could secure a similar position in a company that didn’t happen to be owned by his family.
Of course independent shareholders are somewhat at the mercy of the family’s decisions, but they are clearly in the business of building value over the long term.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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> Tony has shares in ABF but no other shares mentioned in this article.