In 2015 Thomas Williams was appointed CEO of Parker-Hannifin Corporation (NYSE:PH). First, this article will compare CEO compensation with compensation at other large companies. Next, we'll consider growth that the business demonstrates. 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 Thomas Williams's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Parker-Hannifin Corporation has a market cap of US$24b, and reported total annual CEO compensation of US$17m for the year to June 2019. That's less than last year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.3m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Thus we can conclude that Thomas Williams receives more in total compensation than the median of a group of large companies in the same market as Parker-Hannifin Corporation. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at Parker-Hannifin has changed over time.
Is Parker-Hannifin Corporation Growing?
On average over the last three years, Parker-Hannifin Corporation has grown earnings per share (EPS) by 22% each year (using a line of best fit). In the last year, its revenue changed by just 0.1%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. It could be important to check this free visual depiction of what analysts expect for the future.
Has Parker-Hannifin Corporation Been A Good Investment?
Boasting a total shareholder return of 58% over three years, Parker-Hannifin Corporation has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared the total CEO remuneration paid by Parker-Hannifin Corporation, and compared it to remuneration at a group of other large companies. As discussed above, we discovered that the company pays more than the median of that group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. On top of that, in the same period, returns to shareholders have been great. As a result of this good performance, the CEO remuneration may well be quite reasonable. So you may want to check if insiders are buying Parker-Hannifin shares with their own money (free access).
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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.