The Men Who Run United Utilities

Published in Company Comment on 11 October 2012

What you need to know about the utility company'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 United Utilities (LSE: UU), the water company subject to perennial takeover speculation.

Here are the key directors:

Dr John McAdam(non-exec) Chairman
Steve MogfordChief Executive
Russ HouldenChief Financial Officer

Chairman John McAdam was formerly the CEO of chemicals company ICI from 2003 until it was taken over by Akzo Nobel in 2008, and spent his earlier career at Unilever (LSE: ULVR). He joined the board of United Utilities early in 2008, becoming chairman later that year. He was one of the trio of former ICI executives brought in to turn around Rentokil Initial (LSE: RTO) and remains chairman of that company as well as being senior independent director at J Sainsbury (LSE: SBRY) and the non-exec at Rolls-Royce (LSE: RR.), both FTSE 100 firms.


Steve Mogford took up the post of CEO in 2011. He spent his earlier career at BAE Systems (LSE: BA) where he became chief operating officer before becoming CEO of its subsidiary Selex Galileo when it was sold to Italian defence company Finmeccanica. Like John McAdam, he is an engineer by background.

Russ Houlden was CFO at Telecom New Zealand before joining the board as CFO in 2010. Prior to that he undertook finance roles at various companies including BT Group (LSE: BT-A) and ICI where he spent 19 years.

United Utilities five non-execs include former finance directors of FTSE 100 companies Rolls-Royce and Bunzl (LSE: BNZL), as well as some useful-looking civil service contacts.

It is encouraging to see that executive directors are required to keep the equivalent of their base salary in shares in the company. Base pay is relatively modest but is ramped up by a substantial element of performance related pay.

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.

Score 4/5
2. Performance. Success at the company.

Score 3/5
3. Board Composition. Skills, experience, balance

Well balanced.
Score 4/5
4. Remuneration. Fairness of pay, link to performance.

Quite generous when performance–related pay is included.
Score 3/5
5. Directors’ Holdings, compared to their pay.

Score 4/5

Overall, United Utilities scores 18 out of 25, a top quartile result. The chairman may be a little too busy with his other chairmanship and two further FTSE 100 board positions, but overall the board has a competent feel to it.

I've collated all my FTSE 100 boardroom verdicts on this summary page. I hope it helps with your analysis.

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> Tony owns shares in Unilever and BAE Systems but no other shares mentioned in this article. The Motley Fool has recommended Unilever.

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