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Tom Williams became the CEO of Parker-Hannifin Corporation (NYSE:PH) in 2015, 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.
Comparing Parker-Hannifin Corporation's CEO Compensation With the industry
According to our data, Parker-Hannifin Corporation has a market capitalization of US$35b, and paid its CEO total annual compensation worth US$19m over the year to June 2020. That's just a smallish increase of 8.0% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.2m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$7.6m. Accordingly, our analysis reveals that Parker-Hannifin Corporation pays Tom Williams north of the industry median. Moreover, Tom Williams also holds US$46m worth of Parker-Hannifin stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 17% of total compensation out of all the companies we analyzed, while other remuneration made up 83% of the pie. In Parker-Hannifin's case, non-salary compensation represents a greater slice of total remuneration, 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.
Parker-Hannifin Corporation's Growth
Parker-Hannifin Corporation has seen its earnings per share (EPS) increase by 5.2% a year over the past three years. It saw its revenue drop 4.1% over the last year.
We generally like to see a little revenue growth, 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. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Parker-Hannifin Corporation Been A Good Investment?
Most shareholders would probably be pleased with Parker-Hannifin Corporation for providing a total return of 41% 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.
As we noted earlier, Parker-Hannifin pays its CEO higher than the norm for similar-sized companies belonging to the same industry. But shareholder returns have been positive for the last three years. On the other hand, EPS growth — over the same period — is not as impressive. All things considered, we don't think there's a reason to criticize CEO compensation, though we hope Parker-Hannifin will post healthier EPS growth moving forward.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 3 warning signs for Parker-Hannifin that investors should be aware of in a dynamic business environment.
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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