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In 2016, Tim NeCastro was appointed CEO of Erie Indemnity Company (NASDAQ:ERIE). First, this article will compare CEO compensation with compensation at similar sized 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. This method should give us information to assess how appropriately the company pays the CEO.
How Does Tim NeCastro's Compensation Compare With Similar Sized Companies?
Our data indicates that Erie Indemnity Company is worth US$8.3b, and total annual CEO compensation was reported as US$4.2m for the year to December 2019. We note that's an increase of 22% above last year. While we always look at total compensation first, we note that the salary component is less, at US$885k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$4.0b to US$12b. The median total CEO compensation was US$7.5m.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Erie Indemnity stands. Speaking on an industry level, we can see that nearly 20% of total compensation represents salary, while the remainder of 80% is other remuneration. So it seems like there isn't a significant difference between Erie Indemnity and the broader market, in terms of salary allocation in the overall compensation package.
At first glance this seems like a real positive for shareholders, since Tim NeCastro is paid less than the average total compensation paid by similar sized companies. Though positive, it's important we delve into the performance of the actual business. The graphic below shows how CEO compensation at Erie Indemnity has changed from year to year.
Is Erie Indemnity Company Growing?
On average over the last three years, Erie Indemnity Company has seen earnings per share (EPS) move in a favourable direction by 18% each year (using a line of best fit). It achieved revenue growth of 4.0% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. It could be important to check this free visual depiction of what analysts expect for the future.
Has Erie Indemnity Company Been A Good Investment?
Most shareholders would probably be pleased with Erie Indemnity Company for providing a total return of 60% over three years. 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.
It looks like Erie Indemnity Company pays its CEO less than similar sized companies.
Many would consider this to indicate that the pay is modest since the business is growing. The pleasing shareholder returns are the cherry on top; you might even consider that Tim NeCastro deserves a raise! It's not often we see shareholders do so well, and yet the CEO is paid modestly. The cherry on top would be if company insiders are buying shares with their own money. Whatever your view on compensation, you might want to check if insiders are buying or selling Erie Indemnity shares (free trial).
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.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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