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Does LendLease Group's (ASX:LLC) CEO Pay Reflect Performance?

Simply Wall St

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In 2008 Steve McCann was appointed CEO of LendLease Group (ASX:LLC). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. 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. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for LendLease Group

How Does Steve McCann's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that LendLease Group has a market cap of AU$7.5b, and is paying total annual CEO compensation of AU$6.4m. (This is based on the year to June 2018). While we always look at total compensation first, we note that the salary component is less, at AU$2.0m. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of AU$5.7b to AU$17b. The median total CEO compensation was AU$4.1m.

It would therefore appear that LendLease Group pays Steve McCann more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

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

ASX:LLC CEO Compensation, July 2nd 2019

Is LendLease Group Growing?

On average over the last three years, LendLease Group has shrunk earnings per share by 6.0% each year (measured with a line of best fit). It saw its revenue drop -10% over the last year.

Sadly for shareholders, earnings per share are actually down, over three years. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.

Has LendLease Group Been A Good Investment?

LendLease Group has served shareholders reasonably well, with a total return of 22% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

We compared the total CEO remuneration paid by LendLease Group, and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

While shareholder returns are acceptable, they don't delight. So we doubt many shareholders would consider the CEO pay to be particularly modest! Shareholders may want to check for free if LendLease Group insiders are buying or selling shares.

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.

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 editorial-team@simplywallst.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.