Scott Donnelly became the CEO of Textron Inc. (NYSE:TXT) in 2009. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Scott Donnelly's Compensation Compare With Similar Sized Companies?
According to our data, Textron Inc. has a market capitalization of US$6.1b, and paid its CEO total annual compensation worth US$19m over the year to January 2020. We note that's an increase of 36% above last year. While we always look at total compensation first, we note that the salary component is less, at US$1.2m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$4.0b to US$12b. The median total CEO compensation was US$7.4m.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Textron stands. Speaking on an industry level, we can see that nearly 18% of total compensation represents salary, while the remainder of 82% is other remuneration. Non-salary compensation represents a greater slice of the remuneration pie for Textron, in sharp contrast to the overall sector.
As you can see, Scott Donnelly is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Textron Inc. is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business. You can see, below, how CEO compensation at Textron has changed over time.
Is Textron Inc. Growing?
On average over the last three years, Textron Inc. has seen earnings per share (EPS) move in a favourable direction by 21% each year (using a line of best fit). In the last year, its revenue is down 3.3%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. Revenue growth is a real positive for growth, but ultimately profits are more important. You might want to check this free visual report on analyst forecasts for future earnings.
Has Textron Inc. Been A Good Investment?
Given the total loss of 44% over three years, many shareholders in Textron Inc. are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.
We compared total CEO remuneration at Textron 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.
Importantly, though, the company has impressed with its earnings per share growth, over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. This doesn't look great when you consider CEO remuneration is up on last year. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. Shifting gears from CEO pay for a second, we've spotted 3 warning signs for Textron you should be aware of, and 1 of them is a bit unpleasant.
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.
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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. Thank you for reading.