Mike Wells has been the CEO of Prudential plc (LON:PRU) since 2015. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big 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. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Mike Wells’s Compensation Compare With Similar Sized Companies?
Our data indicates that Prudential plc is worth UK£37b, and total annual CEO compensation was reported as UK£7.4m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at UK£1.1m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over UK£6.1b, we found that their median CEO total compensation was UK£3.6m. (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).
As you can see, Mike Wells is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Prudential plc is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at Prudential, below.
Is Prudential plc Growing?
Over the last three years Prudential plc has grown its earnings per share (EPS) by an average of 12% per year (using a line of best fit). It saw its revenue drop 17% over the last year.
This demonstrates that the company has been improving recently. A good result. Revenue growth is a real positive for growth, but ultimately profits are more important. Shareholders might be interested in this free visualization of analyst forecasts.
Has Prudential plc Been A Good Investment?
Prudential plc has generated a total shareholder return of 13% over three years, so most shareholders would be reasonably content. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.
We examined the amount Prudential plc pays its CEO, and compared it to the amount paid by other large companies. Our data suggests that it pays above the median CEO pay within that group.
However, the earnings per share growth over three years is certainly impressive. We also note that, over the same time frame, shareholder returns haven’t been bad. You might wish to research management further, but on this analysis, considering the EPS growth, we wouldn’t call the CEO pay problematic. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Prudential (free visualization of insider trades).
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.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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