Here's What We Learned About The CEO Pay At Emerson Electric Co. (NYSE:EMR)
David Farr became the CEO of Emerson Electric Co. (NYSE:EMR) in 2000, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Check out our latest analysis for Emerson Electric
How Does Total Compensation For David Farr Compare With Other Companies In The Industry?
Our data indicates that Emerson Electric Co. has a market capitalization of US$48b, and total annual CEO compensation was reported as US$16m for the year to September 2020. That's a notable decrease of 19% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.3m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$8.1m. Hence, we can conclude that David Farr is remunerated higher than the industry median. What's more, David Farr holds US$223m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$1.3m | US$1.4m | 8% |
Other | US$15m | US$19m | 92% |
Total Compensation | US$16m | US$20m | 100% |
On an industry level, roughly 31% of total compensation represents salary and 69% is other remuneration. In Emerson Electric's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Emerson Electric Co.'s Growth Numbers
Emerson Electric Co.'s earnings per share (EPS) grew 8.4% per year over the last three years. It saw its revenue drop 8.6% over the last year.
We would argue that the lack of revenue growth in the last year is less than ideal, but the modest EPSgrowth gives us some relief. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Emerson Electric Co. Been A Good Investment?
Emerson Electric Co. has generated a total shareholder return of 31% over three years, so most shareholders would be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
To Conclude...
As we touched on above, Emerson Electric Co. is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But the business isn't growing EPS, and the returns to shareholders haven't been wonderful. Overall, although the company has delivered steady performance, we would like to see an improvement in key metrics before we can say the high CEO compensation is justified.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 2 warning signs for Emerson Electric that investors should be aware of in a dynamic business environment.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
