D. Warren East has been the CEO of Rolls-Royce Holdings plc (LON:RR.) since 2015. First, this article will compare CEO compensation with compensation at other large companies. Next, we'll consider growth that the business demonstrates. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does D. Warren East's Compensation Compare With Similar Sized Companies?
According to our data, Rolls-Royce Holdings plc has a market capitalization of UK£17b, and pays its CEO total annual compensation worth UK£2.3m. (This number is for the twelve months until December 2017). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at UK£931k. We looked at a group of companies with market capitalizations over UK£6.1b and the median CEO total compensation was UK£3.6m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Most shareholders would consider it a positive that D. Warren East takes less in total compensation than the CEOs of most other large companies, leaving more for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.
You can see, below, how CEO compensation at Rolls-Royce Holdings has changed over time.
Is Rolls-Royce Holdings plc Growing?
Rolls-Royce Holdings plc has increased its earnings per share (EPS) by an average of 44% a year, over the last three years (using a line of best fit). Its revenue is up 6.7% over last year.
This demonstrates that the company has been improving recently. A good result. It's also good to see modest revenue growth, suggesting the underlying business is healthy. You might want to check this free visual report on analyst forecasts for future earnings.
Has Rolls-Royce Holdings plc Been A Good Investment?
Boasting a total shareholder return of 43% over three years, Rolls-Royce Holdings plc has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
Rolls-Royce Holdings plc is currently paying its CEO below what is normal for large companies. Since the business is growing, many would argue this suggests the pay is modest. And given most shareholders are probably very happy with recent returns, you might even think that D. Warren East deserves a raise!
Most shareholders like to see a modestly paid CEO combined with strong performance by the company. It would be even more positive if company insiders are buying shares. So you may want to check if insiders are buying Rolls-Royce Holdings shares with their own money (free access).
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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