The Men Who Run National Grid

Published in Company Comment on 16 November 2012

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 National Grid (LSE: NG) (NYSE:NGG.US), the electricity and gas utility.

Here are the key directors:

Sir Peter Gershon(non-exec) Chairman
Steve HollidayChief Executive
Andrew BonfieldFinance Director
Nick WinserExecutive Director, UK
Tom KingExecutive Director, US

Sir Peter Gershon joined the board in 2011 and became chairman at the beginning of this year. Sir Peter spent most of his career in the technology and telecommunications sectors and was a main board director of GEC responsible for its defence businesses until that was sold to BAE Systems (LSE: BA) in 1999.

He then joined the civil service and was responsible for the Gershon Review into public spending efficiency for the Blair administration. He subsequently became a key player in the Tory party's 2010 general election campaign, and his ease in both industry and government is no doubt a great benefit to a utility such as National Grid. He is also chairman of FTSE 100 member Tate & Lyle (LSE: TATE).


In contrast, CEO Steve Holliday has been on the board of National Grid for 11 years, stepping up to CEO in 2007. Much of his earlier career was spent in the oil industry at Exxon and British Borneo Oil and Gas. Though he came in for some criticism for a rights issue in 2010 to repair the balance sheet after the financial crisis, he has redeemed himself in the eyes of shareholders by maintaining a progressive and generous dividend payout.

Finance director Andrew Bonfield has been on the board since November 2010. Prior to that he was CFO of Cadbury before it was sold to Kraft, CFO of Bristol-Myers-Squibb and FD of BG Group (LSE: BG).

Nick Winser joined the board in 2003, having worked for National Grid and its predecessor companies for 20 years prior to that. He was formerly COO of the US transmission business and became director of engineering in 2001. He previously worked for PowerGen and the Central Electricity Generating Board in technical engineering roles. Tom King, appointed to the board in 2007 with responsibility for the US operations, is a US energy sector veteran. He was CEO of Pacific Gas and Electric Company from 2003 to 2007.

National Grid’s non-execs have a wide variety of backgrounds with two accountants, two energy sector industrialists, an energy banker and a former government minister amongst the mix.

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 3/5
2. Performance. Success at the company.

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

Strong and well balanced.
Score 4/5
4. Remuneration. Fairness of pay, link to performance.

Not especially controversial.
Score 3/5
5. Directors’ Holdings, compared to their pay.

Execs have multi-million holdings: Holliday’s is £15m-worth.
Score 5/5

Overall, National Grid scores 18 out of 25, a good result helped along by the directors’ substantial cash investment in the business, though personally I’m a little unenthusiastic about the same person holding more than one FTSE 100 chairmanship.

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

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> Tony owns shares in National Grid, BG Group and BAE Systems but no other shares mentioned in this article.

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