The Men Who Run SABMiller

Published in Company Comment on 30 November 2012

What you need to know about the international brewery 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 SABMiller (LSE: SAB), the world's second-largest brewery group.

Here are the key directors:

DirectorPosition
Graham MackayExecutive Chairman
Alan ClarkChief Operating Officer
Jamie WilsonChief Financial Officer

SABMiller’s unusual executive structure is a temporary measure. Graham MacKay has stepped up from being CEO to serving as executive chairman the 12 months before taking on the non-executive chairmanship next year. At that time, COO Alan Clark will step up to become CEO.

Transition

The transition from a CEO to chairman offends against the combined code on corporate governance, which at least requires the company to justify such a move. SABMiller’s explanation is somewhat thin: simply that because of his long service Graham MacKay is the best man for the job. However the company's two largest shareholders who control 40% of the shares gave their pre-approval, and investors have had a pretty good run with Mr Mackay.

Together with former chairman Meyer Khan he floated the former South African Breweries in 1999, serving as CEO for 13 years during which time the business expanded globally to become the second largest brewery group in the world.

Big Boots

That leaves big boots for Alan Clark to fill. A former clinical psychologist and psychology lecturer, he joined the company in 1990 as training and development manager, subsequently working his way up through the ranks in South Africa and Europe. As managing director of Europe he was seen as an obvious internal candidate for CEO, but there is clearly a risk he will be overshadowed by Mr Mackay.

There is at least some relatively fresh blood in Jamie Wilson, who joined the company in 2005 becoming CFO in 2011. Prior to that he held a number of finance and executive roles within the drinks industry. A chartered accountant, at SABMiller he continued to oscillate between finance and managerial roles including acting as finance director for the European division.

SABMiller's 13 non-execs include five representatives of the Altria group and two representatives of BevCo, the two large shareholders acquired during the company's acquisition history. The 6 independent directors have a mix of backgrounds with appropriate sensitivity to the company's South African heritage. Cyril Ramaphosa, former secretary general of the African National Congress, has been a non-exec since the listing.

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.

Mackay excellent; Clark not well-known outside company.
Score 4/5
2. Performance. Success at the company.

Excellent.
Score 4/5
3. Board Composition. Skills, experience, balance

Faulty.
Score 2/5
4. Remuneration. Fairness of pay, link to performance.

High but not highly controversial.
Score 3/5
5. Directors’ Holdings, compared to their pay.

Some large holdings.
Score 4/5

Overall, SABMiller scores 17 out of 25, a middling result. Performance has been excellent under the tenure of the long-standing former CEO and chairman, but the arrangements for management succession have yet to be tested.

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 does not own any shares mentioned in this article.

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