CEO Change at Franklin Resources Could Be Beneficial
We do not anticipate changes to our moat rating or our fair value estimate as a result of the change of leadership.
We were not too surprised to see Greg Johnson step aside at narrow-moat rated Franklin Resources (BEN) this week, having served as CEO of the firm since January 2004 and chairman of the company’s board of directors since June 2013. Greg will remain on as non-executive chairman, while his sister, Jenny Johnson, who has served as president and chief operating officer since December 2016 assumes the role of president and CEO. We do not anticipate making any changes to our moat or stewardship ratings, or our $28 per share fair value estimate, as a result of the change of leadership.
Franklin Resources has been run by a Johnson since its beginnings as Franklin Distributors in 1947, with the family continuing to own close to 40% of the company’s common stock. This arrangement has left the Johnsons with a significant amount of influence over the operating and investment strategies employed by the firm as well as the makeup of the board of directors.
While management has been frugal with its capital-allocation decisions over the years, sticking to a long-term strategy of continuing to invest in its business, maintaining financial strength and flexibility, and returning a substantial portion of earnings to shareholders as share repurchases and dividends, it has been lackluster at times about attacking deficiencies in Franklin’s operations.
As such, we are encouraged by the move to have Jenny Johnson take the helm, given that she has had a bit more fire in her belly the past few years about getting Franklin attuned to a rapidly changing asset management landscape. She’s been the driver behind several key acquisitions and investments, including the development of Franklin’s ETF operations, the build out of the firm’s data science capabilities, and the adoption of several fintech initiatives.
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Greggory Warren, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.