Is Koninklijke Philips N.V. (AMS:PHIA) Overpaying Its CEO?
Frans van Houten has been the CEO of Koninklijke Philips N.V. (AMS:PHIA) since 2011. This analysis aims first to contrast CEO compensation with other large companies. Then we'll look at a snap shot of the business growth. 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.
Check out our latest analysis for Koninklijke Philips
How Does Frans van Houten's Compensation Compare With Similar Sized Companies?
Our data indicates that Koninklijke Philips N.V. is worth €35b, and total annual CEO compensation was reported as €5.4m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at €1.2m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over €7.2b, we found that their median CEO total compensation was €3.5m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
As you can see, Frans van Houten is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Koninklijke Philips N.V. is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
The graphic below shows how CEO compensation at Koninklijke Philips has changed from year to year.
Is Koninklijke Philips N.V. Growing?
Over the last three years Koninklijke Philips N.V. has grown its earnings per share (EPS) by an average of 36% per year (using a line of best fit). It achieved revenue growth of 5.8% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. You might want to check this free visual report on analyst forecasts for future earnings.
Has Koninklijke Philips N.V. Been A Good Investment?
Boasting a total shareholder return of 53% over three years, Koninklijke Philips N.V. has done well by shareholders. 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...
We compared the total CEO remuneration paid by Koninklijke Philips N.V., and compared it to remuneration at a group of other large companies. We found that it pays well over the median amount paid in the benchmark group.
However we must not forget that the EPS growth has been very strong over three years. Even better, returns to shareholders have been plentiful, over the same time period. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. So you may want to check if insiders are buying Koninklijke Philips shares with their own money (free access).
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.
