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How Should Investors React To W.W. Grainger, Inc.'s (NYSE:GWW) CEO Pay?

Simply Wall St

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DG Macpherson has been the CEO of W.W. Grainger, Inc. (NYSE:GWW) since 2016. First, this article will compare CEO compensation with compensation at other large companies. 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. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for W.W. Grainger

How Does DG Macpherson's Compensation Compare With Similar Sized Companies?

Our data indicates that W.W. Grainger, Inc. is worth US$15b, and total annual CEO compensation is US$10m. (This is based on the year to December 2018). We note that's an increase of 50% above last year. We think total compensation is more important but we note that the CEO salary is lower, at US$1.0m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$12m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

So DG Macpherson is paid around the average of the companies we looked at. 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 W.W. Grainger has changed from year to year.

NYSE:GWW CEO Compensation, June 4th 2019

Is W.W. Grainger, Inc. Growing?

Over the last three years W.W. Grainger, Inc. has grown its earnings per share (EPS) by an average of 10.0% per year (using a line of best fit). It achieved revenue growth of 5.7% over the last year.

I would argue that the improvement in revenue isn't particularly impressive, but I'm happy with the modest EPS growth. So there are some positives here, but not enough to earn high praise. It could be important to check this free visual depiction of what analysts expect for the future.

Has W.W. Grainger, Inc. Been A Good Investment?

W.W. Grainger, Inc. has served shareholders reasonably well, with a total return of 23% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

In Summary...

DG Macpherson is paid around what is normal the leaders of larger companies.

The company isn't showing particularly great growth, and shareholder turns haven't been particularly inspiring in the last few years. But we don't think the CEO compensation is a problem. Whatever your view on compensation, you might want to check if insiders are buying or selling W.W. Grainger shares (free trial).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.