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In 2010 Magnus Nicolin was appointed CEO of Ansell Limited (ASX:ANN). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Magnus Nicolin's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Ansell Limited has a market cap of AU$3.5b, and is paying total annual CEO compensation of US$5.2m. (This number is for the twelve months until June 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$1.1m. When we examined a selection of companies with market caps ranging from US$2.0b to US$6.4b, we found the median CEO total compensation was US$2.4m.
It would therefore appear that Ansell Limited pays Magnus Nicolin more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at Ansell has changed over time.
Is Ansell Limited Growing?
On average over the last three years, Ansell Limited has shrunk earnings per share by 5.6% each year (measured with a line of best fit). It achieved revenue growth of 4.2% over the last year.
Few shareholders would be pleased to read that earnings per share are lower over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Shareholders might be interested in this free visualization of analyst forecasts.
Has Ansell Limited Been A Good Investment?
I think that the total shareholder return of 52%, over three years, would leave most Ansell Limited shareholders smiling. 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.
We compared total CEO remuneration at Ansell Limited with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.
Earnings per share have not grown in three years, and the revenue growth fails to impress us.
On the other hand, returns have been good, so the company is doing something right. So on this analysis we'd stop short of criticizing the level of CEO compensation. Whatever your view on compensation, you might want to check if insiders are buying or selling Ansell shares (free trial).
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 firstname.lastname@example.org. 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.