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Steve Johnston became the CEO of Cincinnati Financial Corporation (NASDAQ:CINF) in 2011. This analysis aims first to contrast CEO compensation with 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. This method should give us information to assess how appropriately the company pays the CEO.
How Does Steve Johnston's Compensation Compare With Similar Sized Companies?
Our data indicates that Cincinnati Financial Corporation is worth US$14b, and total annual CEO compensation is US$3.4m. (This number is for the twelve months until December 2018). That's actually a decrease on the year before. While we always look at total compensation first, we note that the salary component is less, at US$1.0m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total 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.
Most shareholders would consider it a positive that Steve Johnston takes less in total compensation than the CEOs of most other large companies, leaving more for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.
You can see a visual representation of the CEO compensation at Cincinnati Financial, below.
Is Cincinnati Financial Corporation Growing?
On average over the last three years, Cincinnati Financial Corporation has grown earnings per share (EPS) by 12% each year (using a line of best fit). Its revenue is down -5.7% over last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. It could be important to check this free visual depiction of what analysts expect for the future.
Has Cincinnati Financial Corporation Been A Good Investment?
Boasting a total shareholder return of 45% over three years, Cincinnati Financial Corporation has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
Cincinnati Financial Corporation is currently paying its CEO below what is normal for large companies. Many would consider this to indicate that the pay is modest since the business is growing. The strong history of shareholder returns might even have some thinking that Steve Johnston deserves a raise!
It is relatively rare to see a modestly paid CEO when performance is so impressive. But it is even better if company insiders are also buying shares with their own money. So you may want to check if insiders are buying Cincinnati Financial shares with their own money (free access).
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.