In 2016 John Pettigrew was appointed CEO of National Grid plc (LON:NG.). 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 John Pettigrew's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that National Grid plc has a market cap of UK£33b, and reported total annual CEO compensation of UK£4.6m for the year to March 2019. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at UK£944k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We took a group of companies with market capitalizations over UK£6.4b, and calculated the median CEO total compensation to be UK£4.5m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where National Grid stands. On a sector level, around 43% of total compensation represents salary and 57% is other remuneration. Non-salary compensation represents a greater slice of the remuneration pie for National Grid, in sharp contrast to the overall sector.
So John Pettigrew is paid around the average of the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. You can see, below, how CEO compensation at National Grid has changed over time.
Is National Grid plc Growing?
Over the last three years National Grid plc has seen earnings per share (EPS) move in a positive direction by an average of 1.0% per year (using a line of best fit). In the last year, its revenue changed by just 0.3%.
I would argue that the lack of revenue growth in the last year is less than ideal, but it is good to see EPS growth. It's hard to reach a conclusion about business performance right now. This may be one to watch. You might want to check this free visual report on analyst forecasts for future earnings.
Has National Grid plc Been A Good Investment?
National Grid plc has not done too badly by shareholders, with a total return of 7.7%, over three years. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
John Pettigrew is paid around what is normal for the leaders of larger companies.
The company isn't showing particularly great growth, and shareholder turns haven't been particularly inspiring in the last few years. While the CEO may not be underpaid, we don't think the pay is too generous either. CEO compensation is an important area to keep your eyes on, but we've also identified 4 warning signs for National Grid (1 is a bit concerning!) that you should be aware of before investing here.
If you want to buy a stock that is better than National Grid, this free list of high return, low debt companies is a great place to look.
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