Craig Arnold is the CEO of Eaton Corporation plc (NYSE:ETN), and in this article, we analyze the executive's compensation package 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.
How Does Total Compensation For Craig Arnold Compare With Other Companies In The Industry?
At the time of writing, our data shows that Eaton Corporation plc has a market capitalization of US$44b, and reported total annual CEO compensation of US$20m for the year to December 2019. That's a notable increase of 36% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.3m.
For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$12m. This suggests that Craig Arnold is paid more than the median for the industry. What's more, Craig Arnold holds US$38m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 29% of total compensation represents salary and 71% is other remuneration. Eaton pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Eaton Corporation plc's Growth Numbers
Eaton Corporation plc has reduced its earnings per share by 5.0% a year over the last three years. In the last year, its revenue is down 12%.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Eaton Corporation plc Been A Good Investment?
We think that the total shareholder return of 53%, 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.
As we touched on above, Eaton Corporation plc is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. We're not seeing great strides in EPS, but the company has clearly pleased some investors, given the returns over the last three years. Considering positive investor returns, it would be bold of us to criticize CEO compensation, but shareholders might want to see healthier EPS growth before a raise is given out.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 2 warning signs for Eaton that investors should be aware of in a dynamic business environment.
Switching gears from Eaton, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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.
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