Jim Squires became the CEO of Norfolk Southern Corporation (NYSE:NSC) in 2015. First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. 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 Jim Squires’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Norfolk Southern Corporation has a market cap of US$41b, and reported total annual CEO compensation of US$17m for the year to December 2019. We note that’s an increase of 17% above last year. While we always look at total compensation first, we note that the salary component is less, at US$1.1m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$12m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.
Next, let’s break down remuneration compositions to understand how the industry and company compare with each other. On a sector level, around 19% of total compensation represents salary and 81% is other remuneration. Non-salary compensation represents a greater slice of the remuneration pie for Norfolk Southern, in sharp contrast to the overall sector.
It would therefore appear that Norfolk Southern Corporation pays Jim Squires more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn’t mean the remuneration is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous. The graphic below shows how CEO compensation at Norfolk Southern has changed from year to year.
Is Norfolk Southern Corporation Growing?
On average over the last three years, Norfolk Southern Corporation has seen earnings per share (EPS) move in a favourable direction by 11% each year (using a line of best fit). In the last year, its revenue is down 1.4%.
This shows that the company has improved itself over the last few years. Good news for shareholders. Revenue growth is a real positive for growth, but ultimately profits are more important. It could be important to check this free visual depiction of what analysts expect for the future.
Has Norfolk Southern Corporation Been A Good Investment?
Most shareholders would probably be pleased with Norfolk Southern Corporation for providing a total return of 45% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared total CEO remuneration at Norfolk Southern Corporation with the amount paid at other large companies. As discussed above, we discovered that the company pays more than the median of that group.
However, the earnings per share growth over three years is certainly impressive. On top of that, in the same period, returns to shareholders have been great. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. Looking into other areas, we’ve picked out 2 warning signs for Norfolk Southern that investors should think about before committing capital to this stock.
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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