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Is Wm Morrison Supermarkets PLC's (LON:MRW) CEO Overpaid Relative To Its Peers?

Simply Wall St

In 2015 David Potts was appointed CEO of Wm Morrison Supermarkets PLC (LON:MRW). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. 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.

See our latest analysis for Wm Morrison Supermarkets

How Does David Potts's Compensation Compare With Similar Sized Companies?

Our data indicates that Wm Morrison Supermarkets PLC is worth UK£5.2b, and total annual CEO compensation is UK£5.8m. (This figure is for the year to February 2018). We think total compensation is more important but we note that the CEO salary is lower, at UK£850k. When we examined a selection of companies with market caps ranging from UK£3.1b to UK£9.3b, we found the median CEO total compensation was UK£2.5m.

Thus we can conclude that David Potts receives more in total compensation than the median of a group of companies in the same market, and of similar size to Wm Morrison Supermarkets PLC. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see, below, how CEO compensation at Wm Morrison Supermarkets has changed over time.

LSE:MRW CEO Compensation, April 25th 2019

Is Wm Morrison Supermarkets PLC Growing?

On average over the last three years, Wm Morrison Supermarkets PLC has grown earnings per share (EPS) by 2.5% each year (using a line of best fit). Its revenue is up 2.8% over last year.

I'd prefer higher revenue growth, but the modest improvement in EPS is good. So there are some positives here, but not enough to earn high praise. Shareholders might be interested in this free visualization of analyst forecasts.

Has Wm Morrison Supermarkets PLC Been A Good Investment?

Wm Morrison Supermarkets PLC has generated a total shareholder return of 28% over three years, so most shareholders would be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

In Summary...

We examined the amount Wm Morrison Supermarkets PLC pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

Over the last three years returns to investors have been uninspiring, and we would have liked to see stronger business growth. So it's certainly hard to argue that the CEO is modestly paid, although we don't see the remuneration as an issue. So you may want to check if insiders are buying Wm Morrison Supermarkets shares with their own money (free access).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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 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. Thank you for reading.