How Much Did Ashland Global Holdings Inc’s (NYSE:ASH) CEO Pocket Last Year?
Leading Ashland Global Holdings Inc (NYSE:ASH) as the CEO, Bill Wulfsohn took the company to a valuation of $4.43B. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. Today we will assess Wulfsohn’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. See our latest analysis for Ashland Global Holdings
What has ASH performance been like?
Performance can be measured based on factors such as earnings and total shareholder return (TSR). I believe earnings is a cleaner proxy, since many factors can impact share price, and therefore, TSR. Over the last year ASH produced negative earnings of -$132.0M . But this is an improvement on prior year’s loss of -$284.0M, though ASH hasn’t always been loss-making, given its average EPS of $1.25 over the past five years. Given earnings are moving the right way, CEO pay should echo Wulfsohn’s hard work. Over the same period Wulfsohn’s total compensation dropped by a substantial rate of -44.65%, to $7,217,847. Furthermore, Wulfsohn’s pay is also made up of 0.28% non-cash elements, which means that fluxes in ASH’s share price can move the actual level of what the CEO actually receives.
Is ASH overpaying the CEO?
Though no standard benchmark exists, since remuneration should be tailored to the specific company and market, we can evaluate a high-level benchmark to see if ASH is an outlier. This outcome can help shareholders ask the right question about Wulfsohn’s incentive alignment. Generally, a US mid-cap has a value of $5B, creates earnings of $290M and pays its CEO at roughly $5.3M per annum. Usually I would look at market cap and earnings as a proxy for performance, however, ASH’s negative earnings reduces the effectiveness of this method. Given the range of pay for Wulfsohn’s pay is above other similar companies.
What this means for you:
Are you a shareholder? CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Why is Wulfsohn remuneration above that of similar companies? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. To find out more about ASH’s governance, look through our infographic report of the company’s board and management.
Are you a potential investor? Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in ASH, proper governance on behalf of your investment should be a key concern. These decisions made by top management and directors flow down into financials which impact returns to investors. To research more about these fundamentals, I recommend you check out our simple infographic report on ASH’s financial metrics.
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To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
