Mauricio Gutierrez became the CEO of NRG Energy, Inc. (NYSE:NRG) in 2015, and we think it’s a good time to look at the executive’s compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Check out our latest analysis for NRG Energy
Comparing NRG Energy, Inc.’s CEO Compensation With the industry
According to our data, NRG Energy, Inc. has a market capitalization of US$8.4b, and paid its CEO total annual compensation worth US$9.1m over the year to December 2019. That is, the compensation was roughly the same as last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.3m.
In comparison with other companies in the industry with market capitalizations ranging from US$4.0b to US$12b, the reported median CEO total compensation was US$5.8m. Accordingly, our analysis reveals that NRG Energy, Inc. pays Mauricio Gutierrez north of the industry median. Furthermore, Mauricio Gutierrez directly owns US$31m worth of shares in the company, implying that they are deeply invested in the company’s success.
| Component | 2019 | 2018 | Proportion (2019) |
| Salary | US$1.3m | US$1.2m | 14% |
| Other | US$7.8m | US$7.7m | 86% |
| Total Compensation | US$9.1m | US$8.9m | 100% |
On an industry level, around 14% of total compensation represents salary and 86% is other remuneration. NRG Energy is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If non-salary compensation dominates total pay, it’s an indicator that the executive’s salary is tied to company performance.
NRG Energy, Inc.’s Growth
Over the past three years, NRG Energy, Inc. has seen its earnings per share (EPS) grow by 125% per year. In the last year, its revenue is down 1.4%.
Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has NRG Energy, Inc. Been A Good Investment?
Most shareholders would probably be pleased with NRG Energy, Inc. for providing a total return of 45% over three years. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.
In Summary…
As previously discussed, Mauricio is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Importantly though, EPS growth and shareholder returns are very impressive over the last three years. As a result of the excellent all-round performance of the company, we believe CEO compensation is fair. The pleasing shareholder returns are the cherry on top. We wouldn’t be wrong in saying that shareholders feel that Mauricio’s performance creates value for the company.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company’s key performance areas. We identified 4 warning signs for NRG Energy (2 can’t be ignored!) that you should be aware of before investing here.
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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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.
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