Yahoo Finance Does GlaxoSmithKline plc's (LON:GSK) CEO Salary Reflect Performance?
Emma Walmsley has been the CEO of GlaxoSmithKline plc (LON:GSK) since 2017. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big 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 method should give us information to assess how appropriately the company pays the CEO.
See our latest analysis for GlaxoSmithKline
How Does Emma Walmsley's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that GlaxoSmithKline plc has a market cap of UK£70b, and reported total annual CEO compensation of UK£8.4m for the year to December 2019. That's a notable increase of 42% on last year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at UK£1.1m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We took a group of companies with market capitalizations over UK£6.5b, and calculated the median CEO total compensation to be UK£4.6m. (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).
As you can see, Emma Walmsley is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean GlaxoSmithKline plc is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
The graphic below shows how CEO compensation at GlaxoSmithKline has changed from year to year.
Is GlaxoSmithKline plc Growing?
Over the last three years GlaxoSmithKline plc has grown its earnings per share (EPS) by an average of 47% per year (using a line of best fit). It achieved revenue growth of 9.5% over the last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Shareholders might be interested in this free visualization of analyst forecasts.
Has GlaxoSmithKline plc Been A Good Investment?
Since shareholders would have lost about 2.9% over three years, some GlaxoSmithKline plc shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
In Summary...
We compared total CEO remuneration at GlaxoSmithKline plc with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. However, the returns to investors are far less impressive, over the same period. So shareholders might not feel great about the fact that CEO pay increased on last year. While EPS is positive, we'd say shareholders would want better returns before the CEO is paid much more. Looking into other areas, we've picked out 4 warning signs for GlaxoSmithKline that investors should think about before committing capital to this stock.
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.
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. Thank you for reading.
