In 2009 Patrick Williams was appointed CEO of Innospec Inc. (NASDAQ:IOSP). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Patrick Williams's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Innospec Inc. has a market cap of US$2.3b, and reported total annual CEO compensation of US$5.4m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$1.1m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations from US$1.0b to US$3.2b, and the median CEO total compensation was US$4.0m.
Thus we can conclude that Patrick Williams receives more in total compensation than the median of a group of companies in the same market, and of similar size to Innospec Inc.. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
The graphic below shows how CEO compensation at Innospec has changed from year to year.
Is Innospec Inc. Growing?
Over the last three years Innospec Inc. has shrunk its earnings per share by an average of 7.0% per year (measured with a line of best fit). It achieved revenue growth of 7.4% over the last year.
Unfortunately, earnings per share have trended lower over the last three years. And the modest revenue growth over 12 months isn't much comfort against the reduced earnings per share. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. You might want to check this free visual report on analyst forecasts for future earnings.
Has Innospec Inc. Been A Good Investment?
Boasting a total shareholder return of 53% over three years, Innospec Inc. has done well by shareholders. 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 total CEO remuneration at Innospec Inc. with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.
Neither earnings per share nor revenue have been growing sufficiently to impress us, over the last three years. But clearly there are some positives, because investors have done well over the same time frame. Considering this, shareholders are probably not too worried about the CEO compensation. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Innospec (free visualization of insider trades).
Important note: Innospec may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.