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Is Encana Corporation (TSE:ECA) Overpaying Its CEO?

Simply Wall St

Doug Suttles became the CEO of Encana Corporation (TSE:ECA) in 2013. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. 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.

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See our latest analysis for Encana

How Does Doug Suttles's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Encana Corporation has a market cap of CA$13b, and is paying total annual CEO compensation of US$12m. (This figure is for the year to December 2018). That's below the compensation, last year. We think total compensation is more important but we note that the CEO salary is lower, at US$1.1m. We looked at a group of companies with market capitalizations from US$4.0b to US$12b, and the median CEO total compensation was US$4.5m.

Thus we can conclude that Doug Suttles receives more in total compensation than the median of a group of companies in the same market, and of similar size to Encana Corporation. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see, below, how CEO compensation at Encana has changed over time.

TSX:ECA CEO Compensation, May 22nd 2019

Is Encana Corporation Growing?

Over the last three years Encana Corporation has grown its earnings per share (EPS) by an average of 116% per year (using a line of best fit). Its revenue is up 37% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. Shareholders might be interested in this free visualization of analyst forecasts.

Has Encana Corporation Been A Good Investment?

Since shareholders would have lost about 5.0% over three years, some Encana Corporation shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We compared total CEO remuneration at Encana Corporation with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.

However we must not forget that the EPS growth has been very strong over three years. On the other hand returns to investors over the same period have probably disappointed many. While EPS is positive, we'd say shareholders would want better returns before the CEO is paid much more. Whatever your view on compensation, you might want to check if insiders are buying or selling Encana shares (free trial).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.