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Does Goodman Group’s (ASX:GMG) CEO Salary Reflect Performance?

Hector Vargas

Greg Goodman has been the CEO of Goodman Group (ASX:GMG) since 1998. 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. This method should give us information to assess how appropriately the company pays the CEO.

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How Does Greg Goodman’s Compensation Compare With Similar Sized Companies?

According to our data, Goodman Group has a market capitalization of AU$22b, and pays its CEO total annual compensation worth AU$11m. (This number is for the twelve months until 2018). While we always look at total compensation first, we note that the salary component is less, at AU$1.4m. When we examined a group of companies with market caps over AU$11b, we found that their median CEO compensation was AU$5.3m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

Thus we can conclude that Greg Goodman receives more in total compensation than the median of a group of large companies in the same market as Goodman Group. 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.

The graphic below shows how CEO compensation at Goodman Group has changed from year to year.

ASX:GMG CEO Compensation January 30th 19

Is Goodman Group Growing?

On average over the last three years, Goodman Group has shrunk earnings per share by 21% each year. It saw its revenue drop -4.1% over the last year.

Unfortunately, earnings per share have trended lower over the last three years. This is compounded by the fact revenue is actually down on last year. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration.

It could be important to check this free visual depiction of what analysts expect for the future.

Has Goodman Group Been A Good Investment?

Boasting a total shareholder return of 120% over three years, Goodman Group 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.

In Summary…

We examined the amount Goodman Group pays its CEO, and compared it to the amount paid by other large companies. We found that it pays well over the median amount paid in the benchmark 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. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Goodman Group.

Or you might prefer examine intently this intuitive graph showing past earnings and revenue.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.