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Is Eaton Corporation plc's (NYSE:ETN) CEO Pay Fair?

Simply Wall St

Craig Arnold is the CEO of Eaton Corporation plc (NYSE:ETN). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Eaton

How Does Craig Arnold's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Eaton Corporation plc has a market cap of US$33b, and reported total annual CEO compensation of US$15m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.2m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$11m. (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).

Thus we can conclude that Craig Arnold receives more in total compensation than the median of a group of large companies in the same market as Eaton Corporation plc. However, this doesn't necessarily mean the pay 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 Eaton has changed from year to year.

NYSE:ETN CEO Compensation, October 10th 2019

Is Eaton Corporation plc Growing?

Over the last three years Eaton Corporation plc has grown its earnings per share (EPS) by an average of 8.9% per year (using a line of best fit). Its revenue is up 2.6% over last year.

I'm not particularly impressed by the revenue growth, but the modest improvement in EPS is good. It's clear the performance has been quite decent, but it it falls short of outstanding,based on this information. Shareholders might be interested in this free visualization of analyst forecasts.

Has Eaton Corporation plc Been A Good Investment?

I think that the total shareholder return of 33%, over three years, would leave most Eaton Corporation plc shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

We examined the amount Eaton Corporation plc pays its CEO, and compared it to the amount paid by other large companies. As discussed above, we discovered that the company pays more than the median of that group.

One might like to have seen stronger growth, but shareholder returns have been pleasing, over the last three years. As a result of the juicy return to investors, the CEO remuneration may well be quite reasonable. Shareholders may want to check for free if Eaton insiders are buying or selling shares.

Important note: Eaton 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.

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.