Gene Lee became the CEO of Darden Restaurants, Inc. (NYSE:DRI) in 2015. This analysis aims first to contrast CEO compensation with 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. This method should give us information to assess how appropriately the company pays the CEO.
How Does Gene Lee’s Compensation Compare With Similar Sized Companies?
According to our data, Darden Restaurants, Inc. has a market capitalization of US$11b, and paid its CEO total annual compensation worth US$11m over the year to May 2019. We think total compensation is more important but we note that the CEO salary is lower, at US$1.0m. 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 US$8.0b, we found that their median CEO total compensation was US$12m. (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).
Next, let’s break down remuneration compositions to understand how the industry and company compare with each other. On an industry level, roughly 26% of total compensation represents salary and 74% is other remuneration. It’s interesting to note that Darden Restaurants allocates a smaller portion of compensation to salary in comparison to the broader industry.
So Gene Lee is paid around the average of the companies we looked at. Although this fact alone doesn’t tell us a great deal, it becomes more relevant when considered against the business performance. The graphic below shows how CEO compensation at Darden Restaurants has changed from year to year.
Is Darden Restaurants, Inc. Growing?
Darden Restaurants, Inc. has seen earnings per share (EPS) move positively by an average of 13% a year, over the last three years (using a line of best fit). Its revenue is up 4.2% 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. It could be important to check this free visual depiction of what analysts expect for the future.
Has Darden Restaurants, Inc. Been A Good Investment?
With a three year total loss of 2.1%, Darden Restaurants, Inc. would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.
Gene Lee is paid around what is normal for the leaders of larger companies.
We like that the company is growing EPS, but we cannot say the same about the lacklustre shareholder returns (over the last three years). Considering the improvement in earnings per share, one could argue that the CEO pay is appropriate, albeit not too low. Looking into other areas, we’ve picked out 2 warning signs for Darden Restaurants that investors should think about before committing capital to this stock.
Important note: Darden Restaurants may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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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.