Yahoo Finance Is Prudential plc's (LON:PRU) CEO Being Overpaid?
In 2015 Mike Wells was appointed CEO of Prudential plc (LON:PRU). This analysis aims first to contrast CEO compensation with other large companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
View our latest analysis for Prudential
How Does Mike Wells's Compensation Compare With Similar Sized Companies?
Our data indicates that Prudential plc is worth UK£27b, and total annual CEO compensation was reported as UK£6.7m for the year to December 2019. That's actually a decrease on the year before. We think total compensation is more important but we note that the CEO salary is lower, at UK£1.1m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations over UK£6.4b and the median CEO total compensation was UK£4.1m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Prudential stands. On a sector level, around 37% of total compensation represents salary and 63% is other remuneration. Readers will want to know that Prudential pays a modest slice of remuneration through salary, as compared to the wider sector.
Thus we can conclude that Mike Wells receives more in total compensation than the median of a group of large companies in the same market as Prudential plc. However, this doesn't necessarily mean the pay 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, below, how CEO compensation at Prudential has changed over time.
Is Prudential plc Growing?
On average over the last three years, Prudential plc has shrunk earnings per share by 5.7% each year (measured with a line of best fit). In the last year, its revenue is up 162%.
The reduction in earnings per share, over three years, is arguably concerning. But in contrast the revenue growth is strong, suggesting future potential for earnings growth. These two metric are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Shareholders might be interested in this free visualization of analyst forecasts.
Has Prudential plc Been A Good Investment?
With a three year total loss of 19%, Prudential plc would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.
In Summary...
We compared the total CEO remuneration paid by Prudential plc, and compared it to remuneration at a group of other large companies. We found that it pays well over the median amount paid in the benchmark group.
While we have not been overly impressed by the business performance, the shareholder returns, over three years, have been disappointing. Although we'd stop short of calling it inappropriate, we think the CEO compensation is probably more on the generous side of things. Taking a breather from CEO compensation, we've spotted 5 warning signs for Prudential (of which 2 are a bit unpleasant!) you should know about in order to have a holistic understanding of the stock.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
