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Is Goodman Group's (ASX:GMG) CEO Being Overpaid?

Simply Wall St

In 1998 Greg Goodman was appointed CEO of Goodman Group (ASX:GMG). 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. 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.

See our latest analysis for Goodman Group

How Does Greg Goodman's Compensation Compare With Similar Sized Companies?

According to our data, Goodman Group has a market capitalization of AU$28b, and pays its CEO total annual compensation worth AU$11m. (This number is for the twelve months until June 2018). We think total compensation is more important but we note that the CEO salary is lower, at AU$1.4m. We looked at a group of companies with market capitalizations over AU$12b and the median CEO total compensation was AU$5.4m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

It would therefore appear that Goodman Group pays Greg Goodman 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. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see a visual representation of the CEO compensation at Goodman Group, below.

ASX:GMG CEO Compensation, August 4th 2019

Is Goodman Group Growing?

Over the last three years Goodman Group has shrunk its earnings per share by an average of 7.2% per year (measured with a line of best fit). It achieved revenue growth of 14% over the last year.

Unfortunately, earnings per share have trended lower over the last three years. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that earnings per share has gone backwards over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.

Has Goodman Group Been A Good Investment?

Most shareholders would probably be pleased with Goodman Group for providing a total return of 128% 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.

In Summary...

We examined the amount Goodman Group pays its CEO, and compared it to the amount paid by other large companies. Our data suggests that it pays above the median CEO pay within that group.

Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.

But clearly there are some positives, because investors have done well over the same time frame. Considering this, shareholders are probably not too worried about the CEO compensation. Whatever your view on compensation, you might want to check if insiders are buying or selling Goodman Group shares (free trial).

If you want to buy a stock that is better than Goodman Group, this free list of high return, low debt companies is a great place to look.

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.