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Phebe Novakovic became the CEO of General Dynamics Corporation (NYSE:GD) in 2013, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing General Dynamics Corporation's CEO Compensation With the industry
According to our data, General Dynamics Corporation has a market capitalization of US$44b, and paid its CEO total annual compensation worth US$18m over the year to December 2019. That's a notable decrease of 12% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.6m.
In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$18m. From this we gather that Phebe Novakovic is paid around the median for CEOs in the industry. Moreover, Phebe Novakovic also holds US$111m worth of General Dynamics stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 17% of total compensation out of all the companies we analyzed, while other remuneration made up 83% of the pie. In General Dynamics' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at General Dynamics Corporation's Growth Numbers
General Dynamics Corporation has seen its earnings per share (EPS) increase by 5.2% a year over the past three years. Its revenue is down 1.9% over the previous year.
We would argue that the lack of revenue growth in the last year is less than ideal, but the modest EPSgrowth gives us some relief. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has General Dynamics Corporation Been A Good Investment?
With a three year total loss of 20% for the shareholders, General Dynamics Corporation would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.
As we noted earlier, General Dynamics pays its CEO in line with similar-sized companies belonging to the same industry. Meanwhile, General Dynamics is suffering from adverse shareholder returns and althoughEPS have grown over the past three years, they have not been extraordinary. Although we wouldn't say CEO compensation is exceptionally high, it isn't very low either. Shareholders might want to see substantial improvements in returns before agreeing that Phebe deserves a raise.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for General Dynamics that you should be aware of before investing.
Switching gears from General Dynamics, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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.
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