In 2015 Iain Conn was appointed CEO of Centrica plc (LON:CNA). First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Iain Conn's Compensation Compare With Similar Sized Companies?
According to our data, Centrica plc has a market capitalization of UK£6.1b, and pays its CEO total annual compensation worth UK£1.7m. (This number is for the twelve months until December 2017). We think total compensation is more important but we note that the CEO salary is lower, at UK£936k. We examined companies with market caps from UK£3.1b to UK£9.2b, and discovered that the median CEO total compensation of that group was UK£2.5m.
Most shareholders would consider it a positive that Iain Conn takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.
You can see, below, how CEO compensation at Centrica has changed over time.
Is Centrica plc Growing?
Centrica plc has increased its earnings per share (EPS) by an average of 42% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 5.9%.
This demonstrates that the company has been improving recently. A good result. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Shareholders might be interested in this free visualization of analyst forecasts.
Has Centrica plc Been A Good Investment?
Given the total loss of 43% over three years, many shareholders in Centrica plc are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
Centrica plc is currently paying its CEO below what is normal for companies of its size. Considering the underlying business is growing earnings, this would suggest the pay is modest. Few would deny that the total shareholder return over the last three years could have been a lot better. So while we would not say that Iain Conn is generously paid, it would be good to see an improvement in business performance before too an increase in pay.
When I see fairly low remuneration, combined with earnings per share growth, but without big share price gains, it makes me want to research the potential for future gains. Shareholders may want to check for free if Centrica insiders are buying or selling shares.
Important note: Centrica may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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