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John Wren has been the CEO of Omnicom Group Inc. (NYSE:OMC) since 1997, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
How Does Total Compensation For John Wren Compare With Other Companies In The Industry?
Our data indicates that Omnicom Group Inc. has a market capitalization of US$12b, and total annual CEO compensation was reported as US$20m for the year to December 2019. We note that's a decrease of 17% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.0m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$14m. Accordingly, our analysis reveals that Omnicom Group Inc. pays John Wren north of the industry median. What's more, John Wren holds US$56m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 20% of total compensation represents salary, while the remainder of 80% is other remuneration. It's interesting to note that Omnicom Group allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Omnicom Group Inc.'s Growth Numbers
Over the last three years, Omnicom Group Inc. has shrunk its earnings per share by 4.6% per year. In the last year, its revenue is down 6.8%.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Omnicom Group Inc. Been A Good Investment?
With a three year total loss of 15% for the shareholders, Omnicom Group Inc. would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.
As we noted earlier, Omnicom Group pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. Arguably worse, we've been waiting for positive EPS growth for the last three years. Overall, with such poor performance, shareholder's would probably have questions if the company decided to give the CEO a raise.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Omnicom Group that you should be aware of before investing.
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.
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.
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