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In 2014 Mike Clarke was appointed CEO of Treasury Wine Estates Limited (ASX:TWE). First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Mike Clarke's Compensation Compare With Similar Sized Companies?
According to our data, Treasury Wine Estates Limited has a market capitalization of AU$11b, and pays its CEO total annual compensation worth AU$11m. (This figure is for the year to June 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at AU$2.4m. We examined companies with market caps from AU$5.6b to AU$17b, and discovered that the median CEO total compensation of that group was AU$4.1m.
It would therefore appear that Treasury Wine Estates Limited pays Mike Clarke 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 better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at Treasury Wine Estates has changed from year to year.
Is Treasury Wine Estates Limited Growing?
On average over the last three years, Treasury Wine Estates Limited has grown earnings per share (EPS) by 35% each year (using a line of best fit). It achieved revenue growth of 7.8% over the last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. It could be important to check this free visual depiction of what analysts expect for the future.
Has Treasury Wine Estates Limited Been A Good Investment?
Boasting a total shareholder return of 76% over three years, Treasury Wine Estates Limited has done well by shareholders. 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 compared the total CEO remuneration paid by Treasury Wine Estates Limited, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark 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. As a result of this good performance, 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 Treasury Wine Estates (free visualization of insider trades).
If you want to buy a stock that is better than Treasury Wine Estates, this free list of high return, low debt companies is a great place to look.
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 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. Thank you for reading.