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Does Prudential plc's (LON:PRU) CEO Pay Reflect Performance?

Simply Wall St

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Mike Wells has been the CEO of Prudential plc (LON:PRU) since 2015. This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Prudential

How Does Mike Wells's Compensation Compare With Similar Sized Companies?

According to our data, Prudential plc has a market capitalization of UK£44b, and pays its CEO total annual compensation worth UK£7.4m. (This number is for the twelve months until December 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at UK£1.1m. We took a group of companies with market capitalizations over UK£6.3b, and calculated the median CEO total compensation to be UK£3.9m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.

It would therefore appear that Prudential plc pays Mike Wells 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. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see a visual representation of the CEO compensation at Prudential, below.

LSE:PRU CEO Compensation, July 1st 2019

Is Prudential plc Growing?

On average over the last three years, Prudential plc has grown earnings per share (EPS) by 7.9% each year (using a line of best fit). It saw its revenue drop -71% over the last year.

I generally like to see a little revenue growth, but I'm happy with the EPS growth. It's hard to reach a conclusion about business performance right now. This may be one to watch. You might want to check this free visual report on analyst forecasts for future earnings.

Has Prudential plc Been A Good Investment?

Boasting a total shareholder return of 46% over three years, Prudential plc has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We compared the total CEO remuneration paid by Prudential plc, and compared it to remuneration at a group of other large companies. As discussed above, we discovered that the company pays more than the median of that group.

While we generally prefer to see stronger EPS growth, there's no arguing with the strong returns to shareholders, over the last three years. As a result of the juicy return to investors, the CEO remuneration may well be quite reasonable. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Prudential (free visualization of insider trades).

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.