In 2010 Grant Fenn was appointed CEO of Downer EDI Limited (ASX:DOW). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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 process should give us an idea about how appropriately the CEO is paid.
How Does Grant Fenn's Compensation Compare With Similar Sized Companies?
According to our data, Downer EDI Limited has a market capitalization of AU$4.8b, and paid its CEO total annual compensation worth AU$4.7m over the year to June 2019. That's less than last year. We think total compensation is more important but we note that the CEO salary is lower, at AU$1.8m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of AU$3.0b to AU$9.4b. The median total CEO compensation was AU$3.4m.
As you can see, Grant Fenn is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Downer EDI Limited is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see a visual representation of the CEO compensation at Downer EDI, below.
Is Downer EDI Limited Growing?
Downer EDI Limited has reduced its earnings per share by an average of 6.1% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 6.3% over the last year.
Unfortunately, earnings per share have trended lower over the last three years. The fairly low revenue growth fails to impress given that the earnings per share is down. 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 Downer EDI Limited Been A Good Investment?
Most shareholders would probably be pleased with Downer EDI Limited for providing a total return of 64% over three years. 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 examined the amount Downer EDI Limited pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
Neither earnings per share nor revenue have been growing sufficiently to impress us, over the last three years. But clearly there are some positives, because investors have done well over the same time frame. Given this situation we doubt shareholders are particularly concerned about the CEO compensation. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Downer EDI.
Important note: Downer EDI 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.
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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.