In 2015, Jeremy Thigpen was appointed CEO of Transocean Ltd. (NYSE:RIG). First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Jeremy Thigpen's Compensation Compare With Similar Sized Companies?
Our data indicates that Transocean Ltd. is worth US$707m, and total annual CEO compensation was reported as US$9.9m for the year to December 2019. We note that's an increase of 16% above last year. While we always look at total compensation first, we note that the salary component is less, at US$1.0m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$400m to US$1.6b. The median total CEO compensation was US$3.3m.
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Transocean. On an industry level, roughly 20% of total compensation represents salary and 80% is other remuneration. Transocean sets aside a smaller share of compensation for salary, in comparison to the overall industry.
Thus we can conclude that Jeremy Thigpen receives more in total compensation than the median of a group of companies in the same market, and of similar size to Transocean Ltd.. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous. You can see a visual representation of the CEO compensation at Transocean, below.
Is Transocean Ltd. Growing?
On average over the last three years, Transocean Ltd. has seen earnings per share (EPS) move in a favourable direction by 15% each year (using a line of best fit). Revenue was pretty flat on last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. You might want to check this free visual report on analyst forecasts for future earnings.
Has Transocean Ltd. Been A Good Investment?
Given the total loss of 90% over three years, many shareholders in Transocean Ltd. are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.
We examined the amount Transocean Ltd. pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark 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. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. Shifting gears from CEO pay for a second, we've picked out 3 warning signs for Transocean that investors should be aware of in a dynamic business environment.
Important note: Transocean may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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