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Is Brown-Forman Corporation’s (NYSE:BF.B) CEO Overpaid Relative To Its Peers?

Alex Johannesen

Paul Varga has been the CEO of Brown-Forman Corporation (NYSE:BF.B) since 2005. First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Brown-Forman

How Does Paul Varga’s Compensation Compare With Similar Sized Companies?

According to our data, Brown-Forman Corporation has a market capitalization of US$22b, and pays its CEO total annual compensation worth US$8.8m. (This figure is for the year to 2018). While we always look at total compensation first, we note that the salary component is less, at US$1.1m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO compensation was US$11m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

So Paul Varga receives a similar amount to the median CEO pay, amongst the companies we looked at. This doesn’t tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.

You can see a visual representation of the CEO compensation at Brown-Forman, below.

NYSE:BF.B CEO Compensation December 19th 18

Is Brown-Forman Corporation Growing?

On average over the last three years, Brown-Forman Corporation has shrunk earnings per share by 4.5% each year. Its revenue is up 4.7% over last year.

Unfortunately, earnings per share have trended lower over the last three years. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO.

It could be important to check this free visual depiction of what analysts expect for the future.

Has Brown-Forman Corporation Been A Good Investment?

Brown-Forman Corporation has served shareholders reasonably well, with a total return of 21% over three years. But they probably wouldn’t be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary…

Remuneration for Paul Varga is close enough to the median pay for a CEO of a large company .

The company isn’t growing earnings per share, and nor have the total returns inspired us. We wouldn’t say the CEO pay is too high, but we’d venture the company should look to improve its business metrics (and share price) before paying any more. So you may want to check if insiders are buying Brown-Forman shares with their own money (free access).

Or you might prefer examine intently this intuitive graph showing past earnings and revenue.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.