David Farr became the CEO of Emerson Electric Co. (NYSE:EMR) in 2000. This analysis aims first to contrast CEO compensation with other large companies. 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 David Farr's Compensation Compare With Similar Sized Companies?
According to our data, Emerson Electric Co. has a market capitalization of US$41b, and pays its CEO total annual compensation worth US$16m. (This is based on the year to September 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.4m. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
It would therefore appear that Emerson Electric Co. pays David Farr more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn't mean the remuneration is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
You can see, below, how CEO compensation at Emerson Electric has changed over time.
Is Emerson Electric Co. Growing?
Over the last three years Emerson Electric Co. has grown its earnings per share (EPS) by an average of 15% per year (using a line of best fit). In the last year, its revenue is up 9.2%.
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 Emerson Electric Co. Been A Good Investment?
With a total shareholder return of 31% over three years, Emerson Electric Co. shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
We compared total CEO remuneration at Emerson Electric Co. with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. We also think investors are doing ok, over the same time period. While it may be worth researching further, we don't see a problem with the CEO pay, given the good EPS growth. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Emerson Electric (free visualization of insider trades).
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.