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How Should Investors React To Bodycote plc's (LON:BOY) CEO Pay?

Simply Wall St

In 2009 Stephen Harris was appointed CEO of Bodycote plc (LON:BOY). 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. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Bodycote

How Does Stephen Harris's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Bodycote plc has a market cap of UK£1.5b, and reported total annual CEO compensation of UK£2.6m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at UK£542k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of UK£782m to UK£2.5b. The median total CEO compensation was UK£1.4m.

It would therefore appear that Bodycote plc pays Stephen Harris 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 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 Bodycote has changed from year to year.

LSE:BOY CEO Compensation, November 9th 2019

Is Bodycote plc Growing?

On average over the last three years, Bodycote plc has grown earnings per share (EPS) by 16% each year (using a line of best fit). Its revenue is up 2.0% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. It could be important to check this free visual depiction of what analysts expect for the future.

Has Bodycote plc Been A Good Investment?

Most shareholders would probably be pleased with Bodycote plc for providing a total return of 57% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We compared the total CEO remuneration paid by Bodycote plc, and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

However, the earnings per share growth over three years is certainly impressive. Even better, returns to shareholders have been plentiful, over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. Whatever your view on compensation, you might want to check if insiders are buying or selling Bodycote shares (free trial).

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 editorial-team@simplywallst.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.