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Should You Worry About Fairfax Financial Holdings Limited's (TSE:FFH) CEO Pay?

Simply Wall St

V. Watsa has been the CEO of Fairfax Financial Holdings Limited (TSE:FFH) since 1985. This analysis aims first to contrast CEO compensation with other large companies. 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.

See our latest analysis for Fairfax Financial Holdings

How Does V. Watsa's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Fairfax Financial Holdings Limited has a market cap of CA$16b, and reported total annual CEO compensation of US$1.3m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$600k. We took a group of companies with market capitalizations over CA$11b, and calculated the median CEO total compensation to be CA$9.1m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.

A first glance this seems like a real positive for shareholders, since V. Watsa is paid less than the average total compensation paid by other large companies. While this is a good thing, you'll need to understand the business better before you can form an opinion.

You can see a visual representation of the CEO compensation at Fairfax Financial Holdings, below.

TSX:FFH CEO Compensation, November 3rd 2019

Is Fairfax Financial Holdings Limited Growing?

Fairfax Financial Holdings Limited has increased its earnings per share (EPS) by an average of 46% a year, over the last three years (using a line of best fit). It achieved revenue growth of 13% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. Shareholders might be interested in this free visualization of analyst forecasts.

Has Fairfax Financial Holdings Limited Been A Good Investment?

Since shareholders would have lost about 12% over three years, some Fairfax Financial Holdings Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

It looks like Fairfax Financial Holdings Limited pays its CEO less than the average at large companies.

Many would consider this to indicate that the pay is modest since the business is growing. Unfortunately, some shareholders may be disappointed with their returns, given the company's performance over the last three years. So while we don't think, V. Watsa is paid too much, shareholders may hope that business performance translates to investment returns before pay rises are given out. When I see fairly low remuneration, combined with earnings per share growth, but without big share price gains, it makes me want to research the potential for future gains. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Fairfax Financial Holdings (free visualization of insider trades).

If you want to buy a stock that is better than Fairfax Financial Holdings, this free list of high return, low debt companies is a great place to look.

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.