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Is Deutsche Lufthansa AG's (ETR:LHA) CEO Being Overpaid?

Simply Wall St

In 2014 Carsten Spohr was appointed CEO of Deutsche Lufthansa AG (ETR:LHA). First, this article will compare CEO compensation with compensation at similar sized 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.

Check out our latest analysis for Deutsche Lufthansa

How Does Carsten Spohr's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Deutsche Lufthansa AG has a market cap of €6.9b, and is paying total annual CEO compensation of €4.4m. (This figure is for the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at €1.4m. We looked at a group of companies with market capitalizations from €3.6b to €11b, and the median CEO total compensation was €3.2m.

Thus we can conclude that Carsten Spohr receives more in total compensation than the median of a group of companies in the same market, and of similar size to Deutsche Lufthansa AG. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at Deutsche Lufthansa has changed over time.

XTRA:LHA CEO Compensation, September 17th 2019

Is Deutsche Lufthansa AG Growing?

On average over the last three years, Deutsche Lufthansa AG has grown earnings per share (EPS) by 6.0% each year (using a line of best fit). Its revenue is up 2.4% over last year.

I'm not particularly impressed by the revenue growth, but it is good to see modest EPS growth. So there are some positives here, but not enough to earn high praise. Shareholders might be interested in this free visualization of analyst forecasts.

Has Deutsche Lufthansa AG Been A Good Investment?

Boasting a total shareholder return of 54% over three years, Deutsche Lufthansa AG 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.

In Summary...

We compared the total CEO remuneration paid by Deutsche Lufthansa AG, and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

Over the last three years returns to investors have been great, though we might have liked stronger business growth. As a result of the juicy return to investors, the CEO remuneration may well be quite reasonable. Whatever your view on compensation, you might want to check if insiders are buying or selling Deutsche Lufthansa shares (free trial).

Important note: Deutsche Lufthansa 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.

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 editorial-team@simplywallst.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.