Gene Lee became the CEO of Darden Restaurants, Inc. (NYSE:DRI) in 2015, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Darden Restaurants, Inc.'s CEO Compensation With the industry
According to our data, Darden Restaurants, Inc. has a market capitalization of US$13b, and paid its CEO total annual compensation worth US$8.7m over the year to May 2020. We note that's a decrease of 19% compared to last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$830k.
In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$11m. So it looks like Darden Restaurants compensates Gene Lee in line with the median for the industry. What's more, Gene Lee holds US$23m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 25% of total compensation represents salary and 75% is other remuneration. Darden Restaurants sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Darden Restaurants, Inc.'s Growth Numbers
Over the last three years, Darden Restaurants, Inc. has shrunk its earnings per share by 4.3% per year. It saw its revenue drop 8.3% over the last year.
The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Darden Restaurants, Inc. Been A Good Investment?
With a total shareholder return of 32% over three years, Darden Restaurants, Inc. shareholders would, in general, be reasonably content. 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.
As we touched on above, Darden Restaurants, Inc. is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Darden Restaurants has had a tough time in recent years, with declining EPS growth, and although shareholder returns are stable, they are hardly worth celebrating. This doesn't compare well with CEO compensation, which is close to the industry median. We would stop short of the compensation is inappropriate, but we can't say the executive is underpaid.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 3 warning signs (and 1 which is a bit unpleasant) in Darden Restaurants we think you should know about.
Important note: Darden Restaurants is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.