Frans van Houten became the CEO of Koninklijke Philips N.V. (AMS:PHIA) in 2011. This analysis aims first to contrast CEO compensation with other large companies. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
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 €34b, and paid its CEO total annual compensation worth €5.3m over the year to December 2019. That's less than last year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at €1.3m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations over €7.3b and the median CEO total compensation was €4.3m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Koninklijke Philips stands. On an industry level, roughly 64% of total compensation represents salary and 36% is other remuneration. Non-salary compensation represents a greater slice of the remuneration pie for Koninklijke Philips, in sharp contrast to the overall sector.
So Frans van Houten is paid around the average of the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance. You can see, below, how CEO compensation at Koninklijke Philips has changed over time.
Is Koninklijke Philips N.V. Growing?
Koninklijke Philips N.V. has seen earnings per share (EPS) move positively by an average of 19% a year, over the last three years (using a line of best fit). It achieved revenue growth of 7.5% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. 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 36%, 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.
Remuneration for Frans van Houten is close enough to the median pay for a CEO of a large company .
Few would be critical of the leadership, since returns have been juicy and earnings per share are moving in the right direction. Although the pay is a normal amount, some shareholders probably consider it fair or modest, given the good performance of the stock. On another note, we've spotted 1 warning sign for Koninklijke Philips that investors should look into moving forward.
Important note: Koninklijke Philips 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.
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.
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