The Men Who Run Morrison Supermarkets

Published in Company Comment on 6 December 2012

What you need to know about the supermarket 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 Morrison (WM) Supermarkets (LSE: MRW), the UK's fourth-largest supermarket group.

Here are the key directors:

DirectorPosition
Sir Ian Gibson(non-exec) Chairman
Dalton PhilipsChief Executive
Richard PennycookFinance Director

Sir Ian Gibson joined the board as deputy chairman in September 2007 in anticipation of his taking over the chairmanship from Sir Ken Morrison on his retirement in March 2008 after 55 years service; a big job to fill. Though Sir Ian spent 30 years in the car industry with Ford and Nissan, he was no stranger to the supermarket sector: he was deputy chairman of ASDA in the late 1990s.

He has held a slew of non-executive posts, including being a member of the prestigious Court of the Bank of England, but these have not been entirely without controversy. He was a non-executive director of Northern Rock at the time when it had to be rescued by the government, and he stood down early from the chairmanship of Trinity Mirror when that company was embroiled in the 'shareholder spring' earlier this year.

Surprise

Dalton Philips was a surprise appointment when in March 2010 he succeeded Marc Bolland, who moved to become CEO of Marks & Spencer. Mr Phillips was previously chief operating officer of Canada's largest retailer Loblaw. His earlier career was spent in retail in various groups and companies, including a seven year stint at Walmart where he rose to become chief operating officer of Germany.

Richard Pennycook was seen as a credible internal candidate for the post of CEO. Instead the highly-regarded finance director is set to retire next June. He has been in the post since 2005, joining from the RAC where he was finance director.

Mr Pennycook has a broad remit including finance, IT, strategy and 'multichannel development'. That latter aspect is perhaps where Morrison is most seen as the Johnny-come-lately of the supermarket sector, being behind the trend in online sales, convenience stores and non-food merchandising.

Odd

Morrison has a small board for a FTSE 100 company, with just four non-execs making a total of seven directors. The non-execs bring a smattering of retail experience but overall look a slightly odd bunch. I'm not sure, for example, exactly what the CEO of International Power brings to the table.

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.

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

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

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

Uncontroversial.
Score 3/5
5. Directors' Holdings, compared to their pay.

Execs have around one years' basic salary-worth of shares.
Score 3/5

Overall, Morrison scores 14 out of 25, a middling to low result. The composition of the board seems to have little logic, the chairman is busy and not wholly uncontroversial, and the seasoned finance director is leaving. The CEO is still relatively new and has been hit by a number of senior-level defections recently, leaving the management team untested.

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

Buffett's favourite FTSE share

Let me finish by adding that legendary investor Warren Buffett has always looked for impressive management teams when pinpointing which shares to buy. So I think it's important to tell you that the billionaire stock-picker has recently acquired a substantial stake in a prominent FTSE 100 company.

A special free report from The Motley Fool -- "The One UK Share Warren Buffett Loves" -- explains Mr Buffett's purchase and investing logic in full.

And Mr Buffett, don't forget, rarely invests outside his native United States, which to my mind makes this British blue chip -- and its management -- all the more attractive. So why not download the report today? It's totally free and comes with no further obligation.

> Tony does not own any shares mentioned in this article.

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

F958B 06 Dec 2012 , 4:31pm

Buffett also says to look for companies which can be run by idiots - because sooner or later most companies will find themselves with an idiot in charge.

I'd rather have a good company with bad management than a bad company with good management. A good company will usually kick out bad management.

So where do Morrison fit in?
I'd say they're an above-average company with an average management team - and the shares sell for a fairly discounted price relative to the FTSE.*

* I hold shares in Morrison but I'm not particularly interested in adding any shares of any company to my portfolio at present.

Boystown 07 Dec 2012 , 8:59am

So ... write an article about a big company by going to the web page of that company that talks about its Directors, glance briefly at the info therein and re-word it a little, put in some purely subjective "score" then stick in some spurious link to whatever the latest "free report" being pushed is ... and The Fool wonders why it's losing relevance.

What most readers want, I imagine, is well-argued share picks that point out the bull and bear points, and preferably in the overlooked small cap sector. I can read everything about FTSE 100 companies elsewhere - but part of the Foolish ethos is to ignore extraneous factors and concentrate on underlying value - and this article runs directly contrary to that.

If MRW management are mediocre - it MAY be a good contrarian indicator as the City doesn't like them and the SP has suffered. Have a look at MRW's 12 month chart to see what I mean: http://tinyurl.com/bujg5sg

I've had some of my best ever share tips from Fool articles as a pointer to doing my own further research (and have read articles about how to do that research). Where did it all go wrong? I realise the Fool needs income, but this kind of drivel is utterly pointless.

jackdaww 07 Dec 2012 , 9:11am

pointless ??

but it does generate some useful comments.

goodlifer 07 Dec 2012 , 1:05pm

jackdaww,

Yes, I don't normally bother with the articles any more, I just the comments

TRhere 11 Dec 2012 , 5:34pm

@Boystown

"The composition of the board seems to have little logic, the chairman is busy and not wholly uncontroversial, and the seasoned finance director is leaving. The CEO is still relatively new and has been hit by a number of senior-level defections recently, leaving the management team untested."

You may agree or disagree, but I don't think you'd read that on the company's website.

TonyR

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