In 2013 Paul Perreault was appointed CEO of CSL Limited (ASX:CSL). This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Paul Perreault's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that CSL Limited has a market cap of AU$125b, and reported total annual CEO compensation of US$12m for the year to June 2019. That's a modest increase of 4.0% on the prior year year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.7m. Importantly, there may be performance hurdles relating to the non-salary component 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$3.6m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).
It would therefore appear that CSL Limited pays Paul Perreault more than the median CEO remuneration at large companies, 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.
The graphic below shows how CEO compensation at CSL has changed from year to year.
Is CSL Limited Growing?
Over the last three years CSL Limited has grown its earnings per share (EPS) by an average of 16% per year (using a line of best fit). In the last year, its revenue is up 7.9%.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. You might want to check this free visual report on analyst forecasts for future earnings.
Has CSL Limited Been A Good Investment?
Boasting a total shareholder return of 185% over three years, CSL Limited has done well by shareholders. 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.
We examined the amount CSL Limited pays its CEO, and compared it to the amount paid by other large companies. Our data suggests that it pays above the median CEO pay within that group.
However we must not forget that the EPS growth has been very strong over three years. On top of that, in the same period, returns to shareholders have been great. So, considering this good performance, the CEO compensation may be quite appropriate. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling CSL (free visualization of insider trades).
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.
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 email@example.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.