Steve Johnston became the CEO of Cincinnati Financial Corporation (NASDAQ:CINF) in 2011. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Next, we'll consider growth that the business demonstrates. 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 Steve Johnston's Compensation Compare With Similar Sized Companies?
According to our data, Cincinnati Financial Corporation has a market capitalization of US$19b, and paid its CEO total annual compensation worth US$3.4m over the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.0m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
This would give shareholders a good impression of the company, since most large companies pay more, leaving less for shareholders. Though positive, it's important we delve into the performance of the actual business.
The graphic below shows how CEO compensation at Cincinnati Financial has changed from year to year.
Is Cincinnati Financial Corporation Growing?
On average over the last three years, Cincinnati Financial Corporation has grown earnings per share (EPS) by 21% each year (using a line of best fit). It achieved revenue growth of 19% over the last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. You might want to check this free visual report on analyst forecasts for future earnings.
Has Cincinnati Financial Corporation Been A Good Investment?
Most shareholders would probably be pleased with Cincinnati Financial Corporation for providing a total return of 75% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
It appears that Cincinnati Financial Corporation remunerates its CEO below most large companies.
Since the business is growing, many would argue this suggests the pay is modest. The pleasing shareholder returns are the cherry on top; you might even consider that Steve Johnston deserves a raise! Most shareholders like to see a modestly paid CEO combined with strong performance by the company. The cherry on top would be if company insiders are 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.
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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.