What you need to know about the telecommunication 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 BT Group (LSE: BT-A) (NYSE: BT.US), the fixed line telecoms group.
Here are the key directors:
|Sir Michael Rake||(non-exec) Chairman|
|Ian Livingstone||Chief Executive|
|Tony Chanmugam||Finance Director|
|Gavin Patterson||Chief Executive, retail|
Sir Michael Rake was awarded his knighthood for services to accountancy. He worked for KPMG from 1974 to 2007, serving as chairman of KPMG International from 2000 to 2007. He became chairman of BT in 2007, and is also chairman of the airline easyJet (LSE: EZJ) and deputy chairman of Barclays (LSE: BARC).
Both those posts have put him in the news recently. At easyJet he has fought a long running battle with disgruntled shareholder Stelios Haji-Ioannou. And before ruling himself out, he sharply divided opinion among Barclays' top shareholders as to his suitability to replace the outgoing chairman Marcus Agius.
Ian Livingstone joined the board in 2002 as finance director, becoming chief executive of BT Retail in 2005 and CEO in June 2008. Previously he was the youngest FTSE 100 finance director whilst at the then-flourishing retailer Dixons (LSE: DXNS), where he earlier undertook various operational and finance roles. His tenure as CEO has coincided with something of a renaissance in BT's fortunes, and its strong push into broadband.
The shares have done somewhat better than the FTSE in that time, though have lagged mobile operator Vodafone (LSE: VOD). The performance has handsomely rewarded Mr Livingstone, who received remuneration of £7.7 million last year through a three-year turnaround plan, though he did then give up his salary increase.
Tony Chanmugam is a chartered management accountant who became FD in 2008, having served in finance and operational roles within BT before that. Gavin Patterson also joined the board in 2008, having joined BT Retail in 2004. His previous career was spent in marketing roles with Procter and Gamble and Telewest.
BT's six non-execs, led by senior independent director and former government minister Patricia Hewitt, have a mix of backgrounds but collectively look slightly lightweight.
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|
Busy chairman, odd composition.
|4. Remuneration. Fairness of pay, link to performance.|
High, though performance related.
|5. Directors' Holdings, compared to their pay.|
Execs have large holdings.
Overall, BT scores 15 out of 25, a middling to low result. The company's executives look competent and have performed well. But the chairman has a lot on his plate, and the non-execs look a little light on business experience.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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> Tony owns shares in Vodafone, but no other shares mentioned in this article.