David Farr has been the CEO of Emerson Electric Co. (NYSE:EMR) since 2000. First, this article will compare CEO compensation with compensation at other large companies. Then we’ll look at a snap shot of the business growth. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does David Farr’s Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Emerson Electric Co. has a market cap of US$39b, and is paying total annual CEO compensation of US$16m. (This number is for the twelve months until 2018). Notably, that’s an increase of 24% over the year before. 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 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.
As you can see, David Farr is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Emerson Electric Co. is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at Emerson Electric has changed over time.
Is Emerson Electric Co. Growing?
Earnings per share at Emerson Electric Co. are much the same as they were three years ago, albeit slightly lower. In the last year, its revenue is up 14%.
The lack of earnings per share growth in the last three years is unimpressive. And while it’s good to see some good revenue growth recently, the growth isn’t really fast enough for me to put aside my concerns around earnings. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO.
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?
I think that the total shareholder return of 51%, over three years, would leave most Emerson Electric Co. shareholders smiling. 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 compared the total CEO remuneration paid by Emerson Electric Co., and compared it to remuneration at a group of other large companies. We found that it pays well over the median amount paid in the benchmark group.
Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.
On the other hand, returns have been good, so the company is doing something right. So on this analysis we’d stop short of criticizing the level of CEO compensation. 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).
Or you might prefer examine intently this intuitive graph showing past earnings and revenue.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.