Is Frontier Communications Corporation (NASDAQ:FTR) Excessively Paying Its CEO?
Want to help shape the future of investing tools? Participate in a short research study and receive a subscription valued at $60.
In 2015 Dan McCarthy was appointed CEO of Frontier Communications Corporation (NASDAQ:FTR). First, this article will compare CEO compensation with compensation at similar sized companies. Next, we’ll consider growth that the business demonstrates. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
Check out our latest analysis for Frontier Communications
How Does Dan McCarthy’s Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Frontier Communications Corporation has a market cap of US$211m, and is paying total annual CEO compensation of US$6.0m. (This number is for the twelve months until 2017). While we always look at total compensation first, we note that the salary component is less, at US$1.0m. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$100m to US$400m. The median total CEO compensation was US$954k.
It would therefore appear that Frontier Communications Corporation pays Dan McCarthy more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. 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 Frontier Communications has changed over time.
Is Frontier Communications Corporation Growing?
Over the last three years Frontier Communications Corporation has shrunk its earnings per share by an average of 56% per year. In the last year, its revenue is down -6.6%.
Few shareholders would be pleased to read that earnings per share are lower over three years. 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.
It could be important to check this free visual depiction of what analysts expect for the future.
Has Frontier Communications Corporation Been A Good Investment?
Since shareholders would have lost about 96% over three years, some Frontier Communications 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 examined the amount Frontier Communications Corporation pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
Earnings per share have not grown in three years, and the revenue growth fails to impress us.
Over the same period, investors would have come away with nothing in the way of share price gains. Some might well form the view that the CEO is paid too generously! So you may want to check if insiders are buying Frontier Communications shares with their own money (free access).
Or you could feast your eyes on this interactive graph depicting past earnings, cash flow 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 editorial-team@simplywallst.com.
