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Is W.W. Grainger, Inc.'s (NYSE:GWW) CEO Salary Justified?

Simply Wall St

DG Macpherson became the CEO of W.W. Grainger, Inc. (NYSE:GWW) in 2016. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we'll look at a snap shot of the business growth. 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.

Check out our latest analysis for W.W. Grainger

How Does DG Macpherson's Compensation Compare With Similar Sized Companies?

According to our data, W.W. Grainger, Inc. has a market capitalization of US$18b, and paid its CEO total annual compensation worth US$10m over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$1.0m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

So DG Macpherson is paid around the average of the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance.

You can see a visual representation of the CEO compensation at W.W. Grainger, below.

NYSE:GWW CEO Compensation, January 1st 2020

Is W.W. Grainger, Inc. Growing?

On average over the last three years, W.W. Grainger, Inc. has grown earnings per share (EPS) by 19% each year (using a line of best fit). Its revenue is up 2.8% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. It could be important to check this free visual depiction of what analysts expect for the future.

Has W.W. Grainger, Inc. Been A Good Investment?

Boasting a total shareholder return of 54% over three years, W.W. Grainger, Inc. has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

DG Macpherson is paid around what is normal the leaders of larger companies.

Shareholders would surely be happy to see that shareholder returns have been great, and the earnings per share are up. So one could argue the CEO compensation is quite modest, if you consider company performance! If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at W.W. Grainger.

Important note: W.W. Grainger may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

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.

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. Thank you for reading.