In 2013, Paul Perreault was appointed CEO of CSL Limited (ASX:CSL). 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. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
How Does Paul Perreault's Compensation Compare With Similar Sized Companies?
According to our data, CSL Limited has a market capitalization of AU$137b, and paid its CEO total annual compensation worth US$12m over the year to June 2019. We think total compensation is more important but we note that the CEO salary is lower, at US$1.7m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$4.0m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of CSL. Talking in terms of the sector, salary represented approximately 63% of total compensation out of all the companies we analysed, while other remuneration made up 37% of the pie. CSL sets aside a smaller share of compensation for salary, in comparison to the overall industry.
Thus we can conclude that Paul Perreault receives more in total compensation than the median of a group of large companies in the same market as CSL Limited. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. The graphic below shows how CEO compensation at CSL has changed from year to year.
Is CSL Limited Growing?
On average over the last three years, CSL Limited has seen earnings per share (EPS) move in a favourable direction by 15% each year (using a line of best fit). In the last year, its revenue is up 8.1%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Shareholders might be interested in this free visualization of analyst forecasts.
Has CSL Limited Been A Good Investment?
Most shareholders would probably be pleased with CSL Limited for providing a total return of 144% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared total CEO remuneration at CSL Limited with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.
However, the earnings per share growth over three years is certainly impressive. On top of that, in the same period, returns to shareholders have been great. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. Moving away from CEO compensation for the moment, we've identified 2 warning signs for CSL that you should be aware of before investing.
Important note: CSL 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.
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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. Thank you for reading.