Andy Penn became the CEO of Telstra Corporation Limited (ASX:TLS) in 2015. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big 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. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Andy Penn's Compensation Compare With Similar Sized Companies?
According to our data, Telstra Corporation Limited has a market capitalization of AU$36b, and paid its CEO total annual compensation worth AU$5.1m over the year to June 2019. While we always look at total compensation first, we note that the salary component is less, at AU$2.4m. We took a group of companies with market capitalizations over AU$12b, and calculated the median CEO total compensation to be AU$6.3m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Telstra. Speaking on an industry level, we can see that nearly 64% of total compensation represents salary, while the remainder of 36% is other remuneration. Our data reveals that Telstra allocates salary in line with the wider market.
So Andy Penn receives a similar amount to the median CEO pay, amongst the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. You can see a visual representation of the CEO compensation at Telstra, below.
Is Telstra Corporation Limited Growing?
On average over the last three years, Telstra Corporation Limited has shrunk earnings per share by 21% each year (measured with a line of best fit). Its revenue is down 3.1% over 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. You might want to check this free visual report on analyst forecasts for future earnings.
Has Telstra Corporation Limited Been A Good Investment?
With a three year total loss of 15%, Telstra Corporation Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.
Andy Penn is paid around what is normal for the leaders of larger companies.
Returns have been disappointing and the company is not growing its earnings per share. Few would argue that it's wise for the company to pay any more, before returns improve. On another note, Telstra has 6 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
Important note: Telstra 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 email@example.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.
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