D. Warren East has been the CEO of Rolls-Royce Holdings plc (LON:RR.) since 2015. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. 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 D. Warren East's Compensation Compare With Similar Sized Companies?
Our data indicates that Rolls-Royce Holdings plc is worth UK£14b, and total annual CEO compensation was reported as UK£3.9m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at UK£944k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We took a group of companies with market capitalizations over UK£6.3b, and calculated the median CEO total compensation to be UK£3.7m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
That means D. Warren East receives fairly typical remuneration for the CEO of a large company. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.
The graphic below shows how CEO compensation at Rolls-Royce Holdings has changed from year to year.
Is Rolls-Royce Holdings plc Growing?
Rolls-Royce Holdings plc has increased its earnings per share (EPS) by an average of 20% a year, over the last three years (using a line of best fit). It achieved revenue growth of 3.5% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. You might want to check this free visual report on analyst forecasts for future earnings.
Has Rolls-Royce Holdings plc Been A Good Investment?
Rolls-Royce Holdings plc has generated a total shareholder return of 1.3% over three years, so most shareholders wouldn't be too disappointed. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
D. Warren East is paid around what is normal the leaders of larger companies.
We would wish for better returns (whether dividends or capital gains) but we do admire the solid EPS growth on show here. So considering these factors, we think the CEO pay is probably quite reasonable. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Rolls-Royce Holdings (free visualization of insider trades).
If you want to buy a stock that is better than Rolls-Royce Holdings, this free list of high return, low debt companies is a great place to look.
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