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How Does Union Pacific's (NYSE:UNP) CEO Pay Compare With Company Performance?

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Simply Wall St
·3 min read
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Lance Fritz has been the CEO of Union Pacific Corporation (NYSE:UNP) since 2015, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Union Pacific

How Does Total Compensation For Lance Fritz Compare With Other Companies In The Industry?

At the time of writing, our data shows that Union Pacific Corporation has a market capitalization of US$137b, and reported total annual CEO compensation of US$15m for the year to December 2019. Notably, that's an increase of 8.1% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.2m.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$11m. Hence, we can conclude that Lance Fritz is remunerated higher than the industry median. Furthermore, Lance Fritz directly owns US$105m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2019

2018

Proportion (2019)

Salary

US$1.2m

US$1.1m

8%

Other

US$14m

US$13m

92%

Total Compensation

US$15m

US$14m

100%

On an industry level, roughly 20% of total compensation represents salary and 80% is other remuneration. Union Pacific pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
ceo-compensation

Union Pacific Corporation's Growth

Union Pacific Corporation's earnings per share (EPS) grew 12% per year over the last three years. It saw its revenue drop 12% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Union Pacific Corporation Been A Good Investment?

Most shareholders would probably be pleased with Union Pacific Corporation for providing a total return of 87% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

As we touched on above, Union Pacific Corporation is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Importantly though, EPS growth and shareholder returns are very impressive over the last three years. So, in acknowledgment of the overall excellent performance, we believe CEO compensation is appropriate. Given the strong history of shareholder returns, the shareholders are probably very happy with Lance's performance.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for Union Pacific that investors should be aware of in a dynamic business environment.

Important note: Union Pacific is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.