In 2006, Jean-Paul Agon was appointed CEO of L'Oréal S.A. (EPA:OR). First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Jean-Paul Agon's Compensation Compare With Similar Sized Companies?
According to our data, L'Oréal S.A. has a market capitalization of €137b, and paid its CEO total annual compensation worth €9.8m over the year to December 2019. That's just a smallish increase of 2.8% on last year. We think total compensation is more important but we note that the CEO salary is lower, at €2.2m. 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 €7.4b, and calculated the median CEO total compensation to be €3.9m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Talking in terms of the sector, salary represented approximately 63% of total compensation out of all the companies we analysed, while other remuneration made up 37% of the pie. It's interesting to note that L'Oréal allocates a smaller portion of compensation to salary in comparison to the broader industry.
It would therefore appear that L'Oréal S.A. pays Jean-Paul Agon more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business. You can see, below, how CEO compensation at L'Oréal has changed over time.
Is L'Oréal S.A. Growing?
On average over the last three years, L'Oréal S.A. has seen earnings per share (EPS) move in a favourable direction by 4.9% each year (using a line of best fit). Its revenue is up 11% over last year.
This revenue growth could really point to a brighter future. And the modest growth in earnings per share isn't bad, either. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. You might want to check this free visual report on analyst forecasts for future earnings.
Has L'Oréal S.A. Been A Good Investment?
I think that the total shareholder return of 40%, over three years, would leave most L'Oréal S.A. shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
We compared total CEO remuneration at L'Oréal S.A. with the amount paid at other large companies. We found that it pays well over the median amount paid in the benchmark group.
Over the last three years returns to investors have been great, though we might have liked stronger business growth. Considering this fine result for investors, we daresay the CEO compensation might be apt. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at L'Oréal.
If you want to buy a stock that is better than L'Oréal, this free list of high return, low debt companies is a great place to look.
If you spot an error that warrants correction, please contact the editor at email@example.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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