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John Fallon became the CEO of Pearson plc (LON:PSON) in 2013. 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. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
How Does John Fallon's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Pearson plc has a market cap of UK£6.2b, and is paying total annual CEO compensation of UK£3.1m. (This is based on the year to December 2018). Notably, that's an increase of 79% over the year before. We think total compensation is more important but we note that the CEO salary is lower, at UK£795k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of UK£3.2b to UK£9.5b. The median total CEO compensation was UK£2.8m.
That means John Fallon receives fairly typical remuneration for the CEO of a company that size. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.
You can see a visual representation of the CEO compensation at Pearson, below.
Is Pearson plc Growing?
Pearson plc has increased its earnings per share (EPS) by an average of 62% a year, over the last three years (using a line of best fit). In the last year, its revenue is down -8.5%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. While it would be good to see revenue growth, profits matter more in the end. It could be important to check this free visual depiction of what analysts expect for the future.
Has Pearson plc Been A Good Investment?
Pearson plc has generated a total shareholder return of 5.0% over three years, so most shareholders wouldn't be too disappointed. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
Remuneration for John Fallon is close enough to the median pay for a CEO of a similar sized company .
We would wish for better returns (whether dividends or capital gains) but we do admire the solid EPS growth on show here. As a result of these considerations, I would suggest the CEO pay is reasonable. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Pearson.
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.
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 firstname.lastname@example.org. 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.