In 2012, Pascal Soriot was appointed CEO of AstraZeneca PLC (LON:AZN). 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. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Pascal Soriot's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that AstraZeneca PLC has a market cap of UK£118b, and reported total annual CEO compensation of UK£14m for the year to December 2019. We note that's an increase of 11% above last year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at UK£1.3m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. When we examined a group of companies with market caps over UK£6.6b, we found that their median CEO total compensation was UK£3.7m. 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. On a sector level, around 41% of total compensation represents salary and 59% is other remuneration. It's interesting to note that AstraZeneca allocates a smaller portion of compensation to salary in comparison to the broader industry.
It would therefore appear that AstraZeneca PLC pays Pascal Soriot 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 a visual representation of the CEO compensation at AstraZeneca, below.
Is AstraZeneca PLC Growing?
On average over the last three years, AstraZeneca PLC has shrunk earnings per share by 30% each year (measured with a line of best fit). It achieved revenue growth of 13% over the last year.
Sadly for shareholders, earnings per share are actually down, over three years. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for me to put aside my concerns around earnings. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. It could be important to check this free visual depiction of what analysts expect for the future.
Has AstraZeneca PLC Been A Good Investment?
Most shareholders would probably be pleased with AstraZeneca PLC for providing a total return of 92% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared total CEO remuneration at AstraZeneca PLC with the amount paid at other large companies. As discussed above, we discovered that the company pays more than the median of that group.
Earnings per share have not grown in three years, and the revenue growth fails to impress us. However, we can't argue with the strong returns to shareholders, over the same time period. Given this situation we doubt shareholders are particularly concerned about the CEO compensation. CEO compensation is an important area to keep your eyes on, but we've also identified 4 warning signs for AstraZeneca (1 is potentially serious!) that you should be aware of before investing here.
If you want to buy a stock that is better than AstraZeneca, this free list of high return, low debt companies is a great place to look.
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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. Thank you for reading.