In 2011 Frans van Houten was appointed CEO of Koninklijke Philips N.V. (AMS:PHIA). First, this article will compare CEO compensation with compensation at other large companies. Then we'll look at a snap shot of the business growth. 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.
How Does Frans van Houten's Compensation Compare With Similar Sized Companies?
According to our data, Koninklijke Philips N.V. has a market capitalization of €32b, and pays its CEO total annual compensation worth €5.4m. (This is based on the year to December 2018). That's a modest increase of 5.7% on the prior year year. We think total compensation is more important but we note that the CEO salary is lower, at €1.2m. We looked at a group of companies with market capitalizations over €7.1b and the median CEO total compensation was €3.7m. 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 Frans van Houten receives more in total compensation than the median of a group of large companies in the same market as Koninklijke Philips N.V.. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see, below, how CEO compensation at Koninklijke Philips has changed over time.
Is Koninklijke Philips N.V. Growing?
Over the last three years Koninklijke Philips N.V. has grown its earnings per share (EPS) by an average of 43% per year (using a line of best fit). It achieved revenue growth of 1.9% 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 modest revenue growth, suggesting the underlying business is healthy. It could be important to check this free visual depiction of what analysts expect for the future.
Has Koninklijke Philips N.V. Been A Good Investment?
I think that the total shareholder return of 53%, over three years, would leave most Koninklijke Philips N.V. 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 examined the amount Koninklijke Philips N.V. pays its CEO, and compared it to the amount paid by other large companies. As discussed above, we discovered that the company pays more than the median of that group.
However we must not forget that the EPS growth has been very strong over three years. Even better, returns to shareholders have been plentiful, over the same time period. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. So you may want to check if insiders are buying Koninklijke Philips 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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