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Is Walgreens Boots Alliance, Inc. (NASDAQ:WBA) Overpaying Its CEO?

Simply Wall St

In 2015 Stefano Pessina was appointed CEO of Walgreens Boots Alliance, Inc. (NASDAQ:WBA). First, this article will compare CEO compensation with compensation at other large companies. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Walgreens Boots Alliance

How Does Stefano Pessina's Compensation Compare With Similar Sized Companies?

Our data indicates that Walgreens Boots Alliance, Inc. is worth US$39b, and total annual CEO compensation was reported as US$19m for the year to August 2019. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$12m. (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).

Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Walgreens Boots Alliance. Talking in terms of the sector, salary represented approximately 22% of total compensation out of all the companies we analysed, while other remuneration made up 78% of the pie. Walgreens Boots Alliance sets aside a smaller share of compensation for salary, in comparison to the overall industry.

As you can see, Stefano Pessina is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Walgreens Boots Alliance, Inc. is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance. You can see a visual representation of the CEO compensation at Walgreens Boots Alliance, below.

NasdaqGS:WBA CEO Compensation April 14th 2020

Is Walgreens Boots Alliance, Inc. Growing?

Over the last three years Walgreens Boots Alliance, Inc. has seen earnings per share (EPS) move in a positive direction by an average of 5.4% per year (using a line of best fit). It achieved revenue growth of 1.9% over the last year.

I'd prefer higher revenue growth, but the modest improvement in EPS is good. It's clear the performance has been quite decent, but it it falls short of outstanding,based on this information. It could be important to check this free visual depiction of what analysts expect for the future.

Has Walgreens Boots Alliance, Inc. Been A Good Investment?

With a three year total loss of 42%, Walgreens Boots Alliance, Inc. would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared the total CEO remuneration paid by Walgreens Boots Alliance, Inc., and compared it to remuneration at a group of other large companies. Our data suggests that it pays above the median CEO pay within that group.

The growth in the business has been uninspiring, but the shareholder returns have arguably been worse, over the last three years. Considering this, we have the opinion that the CEO pay is more on the generous side, than the modest side. Shifting gears from CEO pay for a second, we've picked out 3 warning signs for Walgreens Boots Alliance that investors should be aware of in a dynamic business environment.

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.

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.

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