How Should Investors Feel About National Grid's (LON:NG.) CEO Remuneration?
This article will reflect on the compensation paid to John Pettigrew who has served as CEO of National Grid plc (LON:NG.) since 2016. This analysis will also assess whether National Grid pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Check out our latest analysis for National Grid
How Does Total Compensation For John Pettigrew Compare With Other Companies In The Industry?
According to our data, National Grid plc has a market capitalization of UK£31b, and paid its CEO total annual compensation worth UK£5.3m over the year to March 2020. We note that's an increase of 14% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at UK£1.0m.
On comparing similar companies in the industry with market capitalizations above UK£6.1b, we found that the median total CEO compensation was UK£4.4m. This suggests that National Grid remunerates its CEO largely in line with the industry average. Furthermore, John Pettigrew directly owns UK£6.2m worth of shares in the company, implying that they are deeply invested in the company's success.
Component | 2020 | 2019 | Proportion (2020) |
Salary | UK£1.0m | UK£944k | 19% |
Other | UK£4.3m | UK£3.7m | 81% |
Total Compensation | UK£5.3m | UK£4.7m | 100% |
Speaking on an industry level, nearly 34% of total compensation represents salary, while the remainder of 66% is other remuneration. In National Grid's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at National Grid plc's Growth Numbers
Over the last three years, National Grid plc has shrunk its earnings per share by 2.6% per year. In the last year, its revenue changed by just 0.6%.
A lack of EPS improvement is not good to see. And the flat revenue hardly impresses. 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 National Grid plc Been A Good Investment?
With a total shareholder return of 19% over three years, National Grid plc shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
To Conclude...
As previously discussed, John is compensated close to the median for companies of its size, and which belong to the same industry. According to our analysis, National Grid is suffering from uninspiring EPS growth, and even though shareholder returns are stable, they are hardly impressive. This doesn't compare well with CEO compensation, which is close to the industry median. Considering all of this, we can't say the CEO is underpaid, and moving forward shareholders will likely want to see higher growth to justify any raise.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 2 warning signs for National Grid (of which 1 can't be ignored!) that you should know about in order to have a holistic understanding of the stock.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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