Here's Why The Williams Companies, Inc.'s (NYSE:WMB) CEO Compensation Is The Least Of Shareholders' Concerns
Despite The Williams Companies, Inc.'s (NYSE:WMB) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. Some of these issues will occupy shareholders' minds as the AGM rolls around on 27 April 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
See our latest analysis for Williams Companies
Comparing The Williams Companies, Inc.'s CEO Compensation With the industry
According to our data, The Williams Companies, Inc. has a market capitalization of US$29b, and paid its CEO total annual compensation worth US$12m over the year to December 2020. We note that's a decrease of 22% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.3m.
For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$14m. This suggests that Williams Companies remunerates its CEO largely in line with the industry average. Moreover, Murray Armstrong also holds US$20m worth of Williams Companies stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$1.3m | US$1.2m | 11% |
Other | US$11m | US$14m | 89% |
Total Compensation | US$12m | US$16m | 100% |
On an industry level, roughly 20% of total compensation represents salary and 80% is other remuneration. Williams Companies sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
The Williams Companies, Inc.'s Growth
Over the last three years, The Williams Companies, Inc. has shrunk its earnings per share by 60% per year. In the last year, its revenue is down 5.9%.
Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has The Williams Companies, Inc. Been A Good Investment?
The Williams Companies, Inc. has generated a total shareholder return of 12% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
To Conclude...
Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 4 warning signs for Williams Companies (of which 2 don't sit too well with us!) that you should know about in order to have a holistic understanding of the stock.
Important note: Williams Companies is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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