In 2014 Dave McKay was appointed CEO of Royal Bank of Canada (TSE:RY). First, this article will compare CEO compensation with compensation at other large companies. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Dave McKay's Compensation Compare With Similar Sized Companies?
According to our data, Royal Bank of Canada has a market capitalization of CA$151b, and paid its CEO total annual compensation worth CA$14m over the year to October 2018. We think total compensation is more important but we note that the CEO salary is lower, at CA$1.5m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations over CA$11b and the median CEO total compensation was CA$8.9m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
It would therefore appear that Royal Bank of Canada pays Dave McKay more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn't mean the remuneration is too high. 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 Royal Bank of Canada has changed from year to year.
Is Royal Bank of Canada Growing?
Royal Bank of Canada has increased its earnings per share (EPS) by an average of 8.7% a year, over the last three years (using a line of best fit). It achieved revenue growth of 5.7% over the last year.
I'm not particularly impressed by the revenue growth, but the modest improvement in EPS is good. 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 Royal Bank of Canada Been A Good Investment?
Most shareholders would probably be pleased with Royal Bank of Canada for providing a total return of 43% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We examined the amount Royal Bank of Canada pays its CEO, and compared it to the amount paid by other large companies. We found that it pays well over the median amount paid in the benchmark group.
Over the last three years returns to investors have been great, though we might have liked stronger business growth. So, considering these tasty returns, the CEO compensation may be quite appropriate. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Royal Bank of Canada (free visualization of insider trades).
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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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.