Ameresco Inc: Financial and Corporate Governance - Research Paper Example

I. CURRENT SITUATION A. Current Performance The financial performance of the company has tremendously improved the past year. Its return on investment increased from 0.90 in 2013 to 10.58 in the third quarter of 2014. Its profitability increased from 0.42% to 0.60% while its market share, it is the leading energy efficiency as well as renewable energy corporation B. Strategic Posture (finance.yahoo.com). What are the corporation's current mission, objectives, strategies, and policies? Ameresco Inc. (AMRC) refers to an integrated electric energy corporation that supplies a variety of energy solutions such as hydro electric, energy cogeneration, and renewable energy facilities. Its current mission is to lead the quest in changing the world as the trusted partner that creates energy solutions that are valued, efficient and single-sourced and is delivered with passion, teamwork, expertise as well as persistent focus on customer satisfaction (ameresco.com). Its corporate and business objectives include: profit and growth maximization, maximizing shareholders well-being, corporate image and social/ethical concerns. Its functional objectives are to maximize customer service, to create efficient and valued energy solutions, to demonstrate high and consistent ethical standard, to be loyal and accountable to the stakeholders (ameresco.com). The objectives are consistent with each other, with the strategies, and objectives as well as with both internal and external environment. Ameresco uses strategies like partnerships, mass market, vertical integration, and diversification strategies to increase their market share. The strategies are consistent with each other, with the strategies, and objectives as well as with both internal and external environment because they enable the corporation to be the leading energy efficiency as well as renewable energy corporation. Their policy is to create value for their clients by delivering high quality products and services to the customers (ameresco.com). Another policy is honesty and service in all that they do. The policies are consistent with each other, with the strategies, and objectives as well as with both internal and external environment because they enable the company to act ethically. The corporation’s mission, objectives, strategies and policies are clearly stated and not merely implied from their performance. Ameresco Inc. (AMRC) is in the business of supplying a variety of energy solutions such as hydro electric, energy cogeneration, and renewable energy facilities because it is the leading energy efficiency as well as renewable energy corporation (ameresco.com). The objectives, current mission, and policies reflect Ameresco’s international operations. They have enabled the corporation to maintain a reputation for high level excellence, act with both corporate and personal integrity, and care for all stakeholders and serve the country and the communities (Preston, 2010). II.CORPORATE GOVERNANCE A. Board of Directors 1. Who is on the board? Are they internal or external members? Ameresco’s Board of directors has 8 members namely, George P. Sakellaris (Chairman of the Board, President and the CEO), David J. Anderson (Executive Vice President, Business Development as well as Director), David J. Corrsin (Executive VP, General Counsel, secretary and Director). Other directors include Frank V. Wisneski, Douglas I. Foy, Joseph W. Sutton, Jennifer L. Miller and Michael E. Jesanis. The executives are internal members while the other directors are external members (corporate-ir.net). 2. Do they own significant shares of stock? The company includes equity as form of compensation for directors and each one of them is permitted to acquire and hold shares of stock in an amount that is appropriate and meaningful for them. Therefore, they own significant shares of stock because they own 39.94% of the total shares (finance.yahoo.com). 3. Is the stock privately held or publicly traded? Are there different classes of stock with different voting rights? The stock are both privately held and publicly traded. AMRC is traded on New York Stock Exchange. Out of its 46.35 M outstanding shares, 742.36 K shares are now shorted by institutional and private investors with approximately 7.6 trading days to cover (finance.yahoo.com). There is only Class A common stock with the same voting rights (Whitcomb, 2011). 4. What do the board members contribute to the corporation in terms of knowledge, skills, background, and connections? If the corporation has international operations, do board members have international experience? Board members should demonstrate a significant accomplishment in their respective field. In terms of knowledge, they contribute expertise in various fields as well as the ability to make crucial contribution to the affairs of the company as well as to the Board’s oversight of the business. They should show high reputation for ethical and honest conduct in both their personal and professional activities. In terms of skills, they contribute analytical, technical, interpersonal, decision-making and sound judgment skills. They should demonstrate a good understanding of the business environment of the Company as well as extensive experience in the industry in which the company operates. The board members should have diverse connections to ensure that they contribute to new businesses or industries that the company can enter. They contribute financial analysis skills, strategic marketing skills, asset management and information technology knowledge, extensive energy regulation experience, and diversified experience in the energy industry (corporate-ir.net). The Board members therefore have international experience in case the corporation has international operations. For instance, Frank V. Wisneski is an asset manager that serves clients globally, Mr. Corrsin has been an executive VP of Public Power International Inc., a corporation that operates globally. The founder has diversified international experience in the energy industry Whitcomb, 2011). 5. How long have members served on the board? Ameresco’s Board does not believe is establishing term limits because term limits could lead to loss of directors who have developed and contributed to the operations of the company as wells its institutional memory that benefits the whole organization. They believe in keeping the directors. Alternatively, the Nominating and Corporate Governance committee reviews every director’s continuation on the Board at least once in every three years (corporate-ir.net). 6. What is their level of involvement in strategic management? Do they merely rubber stamp top management's proposals, or do they actively participate and suggest future directions? The Board does not fully take part in strategic management of the company. They only reviews and approves basic financial, operating as well as other corporate strategies, plans and objectives. They review and approve top management succession plans and provide assistance and advice to the company’s Top management executives. In other words, they merely rubber stamp the proposals of the top management (corporate-ir.net). B. Top Management 1. What person or group constitutes top management? Ameresco’s top management is composed of Chairman of the Board of directors, the president and the CEO, Mr. Sakellaris; the Executive Vice President, business Development and director, Mr. David Anderson; Senior Vice President, Renewable Energy, Mr., Michael Bakas; Executive VP, General Counsel, secretary and Director, Mr. Corrsin; Executive VP, Mr. Joseph DeManche; Executive VP and General Manager of Central Region, Mr. Maltezos; and VP and Chief Financial Officer, Mr. Spence (corporate-ir.net). 2. What are top management's chief characteristics in terms of knowledge, skills, background, and style? If the corporation has international operations, does top management have international experience? Are executives from acquired companies considered part of the top management team? The top management is required to demonstrate good educational and professional background in their respective fields. They should show extensive knowledge financial analysis, accounting asset management, energy regulation, strategic marketing skills as well as diverse experience in the energy industry. Top management must show flexibility, networking abilities, and achievement motivation and action orientation. They should show analytical, technical, interpersonal, and effective communication skills. In addition, they should have sound judgment, integrity, diversity of backgrounds and willingness to devote adequate effort and time to their duties and responsibilities. The members of the top management have held diverse positions in different international companies and hence have the international experience required for Ameresco’s international operations. No, the executives from acquired companies are not considered part of the top management team. They are only Board members Whitcomb, 2011). 3. Has top management been responsible for the corporation's performance over the past few years? How many managers have been in their current position for less than three years? Were they promoted internally or externally hired? The top management has been responsible for the Ameresco’s performance over the past few years. They are the ones that are responsible for the formulation of fundamental financial, operating as well as other corporate objectives, plans and strategies. They enter in material transactions and commitments in the ordinary course of business. In addition, they formulate policies and practices of the company. From the list of top management, no manager has been in the current position for less than three years. Most of them have been promoted internally while few of them like Mr. Spence were externally hired from ABB Energy Capital L.L.C (corporate-ir.net). 4. Has top management established a systematic approach to strategic management? Yes, the top management has established a systematic approach to strategic management. This strategic approach is to help them manage and grow the corporation’s most valuable institutional customers so as to maximize mutual value as well s to achieve mutually beneficial goals. It is also to help them determine sustainable renewable funding levels as well as to optimize renewable planning decisions. 5. What is top management's level of involvement in the strategic management process? They actively take part in the strategic management process. They are the ones that are responsible for the formulation of fundamental financial, operating as well as other corporate objectives, plans and strategies (corporate-ir.net). They are the ones that commit corporate resources to use for business purposes. They enter in material transactions and commitments in the ordinary course of business. In addition, they formulate policies and practices of the company. 6. How well does top management interact with lower-level managers and with the board of directors? There is a close interaction between the top management and the lower-level management as well as the board of directors. The top management reports to the board of directors and the lower-level management refer to the top management for advice and assistance in solving new problems however critical decisions are made by top management. The close interaction between the board and the top management help in achieving the balance between priorities of the organization and those of the external stakeholders (corporate-ir.net). 7. Are strategic decisions made ethically, in a socially responsible manner? In line with their mission and vision, strategic decisions are made by the top management ethically, in a socially responsible manner. The top managements have over time shown accountability, transparency and integrity in all their strategic decisions (corporate-ir.net). 8. What role do stock options play in executive compensation? Stock options encourage and retain talents of executives. Stock options maximize performance by encouraging top management to act in the shareholders’ best interest. Stock options granted based on pay for performance ensures that the management works towards greater success. They are not included in income statements hence does not affect income (corporate-ir.net). 9. Is top management sufficiently skilled to cope with likely future challenges? The top management is sufficiently skilled to cope with possible future challenges. They have held diverse positions in different companies in the energy industry. They have the required skills, experience and expertise to deal with future challenges. They have more than 20 years proven track record in energy services, energy solutions and utility businesses. In addition, one has over 23 years of energy-related legal practice (corporate-ir.net). References Ameresco Inc. Website Retrieved from: http://www.ameresco.com/company/mission-vision-and-values Ameresco Inc. corporate governance. Retrieved from: http://phx.corporate-ir.net/phoenix.zhtml?c=235911&p=irol-govGuidelines_pf Yahoo Finance Retrieved from: http://finance.yahoo.com/q/ks?s=AMRC+Key+Statistics Preston, S. C. (2010). Implementing HUD's Energy Strategy: Progress Report. New York: Diane Publishing company Whitcomb, J. (2011). A Guide for Developing Zero Energy Communities. New York: Peter Lang Read More