How Should Investors React To Coca-Cola's (NYSE:KO) CEO Pay?

James Robert Quincey has been the CEO of The Coca-Cola Company (NYSE:KO) since 2017, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Coca-Cola

How Does Total Compensation For James Robert Quincey Compare With Other Companies In The Industry?

Our data indicates that The Coca-Cola Company has a market capitalization of US$206b, and total annual CEO compensation was reported as US$19m for the year to December 2019. We note that's an increase of 12% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.6m.

For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$9.3m. This suggests that James Robert Quincey is paid more than the median for the industry. Moreover, James Robert Quincey also holds US$13m worth of Coca-Cola stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 19% of total compensation represents salary and 81% is other remuneration. In Coca-Cola's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

The Coca-Cola Company's Growth

The Coca-Cola Company has seen its earnings per share (EPS) increase by 30% a year over the past three years. In the last year, its revenue is down 2.7%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has The Coca-Cola Company Been A Good Investment?

With a total shareholder return of 17% over three years, The Coca-Cola Company shareholders would, in general, be reasonably content. 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.

To Conclude...

As we noted earlier, Coca-Cola pays its CEO higher than the norm for similar-sized companies belonging to the same industry. However, the EPS growth over three years is certainly impressive. We also think investor returns are steady over the same time period. So, considering the EPS growth we do not wish to criticize CEO compensation, though we'd recommend further research on management.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 3 warning signs for Coca-Cola you should be aware of, and 2 of them shouldn't be ignored.

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.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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