In 2004 Martin Richenhagen was appointed CEO of AGCO Corporation (NYSE:AGCO). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Martin Richenhagen's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that AGCO Corporation has a market cap of US$5.6b, and reported total annual CEO compensation of US$21m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$1.4m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. When we examined a selection of companies with market caps ranging from US$4.0b to US$12b, we found the median CEO total compensation was US$6.8m.
It would therefore appear that AGCO Corporation pays Martin Richenhagen more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at AGCO, below.
Is AGCO Corporation Growing?
Over the last three years AGCO Corporation has grown its earnings per share (EPS) by an average of 30% per year (using a line of best fit). It achieved revenue growth of 1.8% over the last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. Shareholders might be interested in this free visualization of analyst forecasts.
Has AGCO Corporation Been A Good Investment?
Most shareholders would probably be pleased with AGCO Corporation for providing a total return of 49% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
We compared the total CEO remuneration paid by AGCO Corporation, and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. On top of that, in the same period, returns to shareholders have been great. As a result of this good performance, the CEO remuneration may well be quite reasonable. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling AGCO (free visualization of insider trades).
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.