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Increases to Johnson Controls International plc's (NYSE:JCI) CEO Compensation Might Cool off for now

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Simply Wall St
·4 min read
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The share price of Johnson Controls International plc (NYSE:JCI) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. The upcoming AGM on 10 March 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. 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 Johnson Controls International

How Does Total Compensation For George Oliver Compare With Other Companies In The Industry?

According to our data, Johnson Controls International plc has a market capitalization of US$42b, and paid its CEO total annual compensation worth US$14m over the year to September 2020. We note that's a decrease of 11% 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.

In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$6.9m. This suggests that George Oliver is paid more than the median for the industry. Furthermore, George Oliver directly owns US$66m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2020

2019

Proportion (2020)

Salary

US$1.3m

US$1.5m

10%

Other

US$12m

US$14m

90%

Total Compensation

US$14m

US$15m

100%

On an industry level, roughly 17% of total compensation represents salary and 83% is other remuneration. It's interesting to note that Johnson Controls International 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.

ceo-compensation
ceo-compensation

A Look at Johnson Controls International plc's Growth Numbers

Over the last three years, Johnson Controls International plc has shrunk its earnings per share by 5.8% per year. In the last year, its revenue is down 8.3%.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Johnson Controls International plc Been A Good Investment?

We think that the total shareholder return of 70%, over three years, would leave most Johnson Controls International plc shareholders smiling. 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.

To Conclude...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. 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.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 3 warning signs for Johnson Controls International that you should be aware of before investing.

Important note: Johnson Controls International 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.