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How Should Investors Feel About United Utilities Group's (LON:UU.) CEO Remuneration?

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Simply Wall St
·4 min read
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Steve Mogford became the CEO of United Utilities Group PLC (LON:UU.) in 2011, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether United Utilities Group pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for United Utilities Group

Comparing United Utilities Group PLC's CEO Compensation With the industry

Our data indicates that United Utilities Group PLC has a market capitalization of UK£6.4b, and total annual CEO compensation was reported as UK£2.6m for the year to March 2020. That's a fairly small increase of 5.6% over the previous year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at UK£769k.

On examining similar-sized companies in the industry with market capitalizations between UK£2.9b and UK£8.8b, we discovered that the median CEO total compensation of that group was UK£2.1m. So it looks like United Utilities Group compensates Steve Mogford in line with the median for the industry. What's more, Steve Mogford holds UK£1.0m worth of shares in the company in their own name.

Component

2020

2019

Proportion (2020)

Salary

UK£769k

UK£754k

30%

Other

UK£1.8m

UK£1.7m

70%

Total Compensation

UK£2.6m

UK£2.4m

100%

On an industry level, around 42% of total compensation represents salary and 58% is other remuneration. It's interesting to note that United Utilities Group allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
ceo-compensation

United Utilities Group PLC's Growth

Over the last three years, United Utilities Group PLC has shrunk its earnings per share by 36% per year. Its revenue is down 1.1% over the previous year.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has United Utilities Group PLC Been A Good Investment?

We think that the total shareholder return of 52%, over three years, would leave most United Utilities Group 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.

In Summary...

As we noted earlier, United Utilities Group pays its CEO in line with similar-sized companies belonging to the same industry. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. On the other hand, shareholder returns are showing positive trends over the same time frame. We're not saying CEO compensation is too generous, but shareholders might think performance needs to be improved before paying any more.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 5 warning signs for United Utilities Group (2 are concerning!) that you should be aware of before investing here.

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.

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.