What Can We Conclude About General Dynamics' (NYSE:GD) CEO Pay?

Phebe Novakovic has been the CEO of General Dynamics Corporation (NYSE:GD) since 2013, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for General Dynamics.

Check out our latest analysis for General Dynamics

How Does Total Compensation For Phebe Novakovic Compare With Other Companies In The Industry?

Our data indicates that General Dynamics Corporation has a market capitalization of US$44b, and total annual CEO compensation was reported as US$18m for the year to December 2019. Notably, that's a decrease of 12% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.6m.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$17m. This suggests that General Dynamics remunerates its CEO largely in line with the industry average. Furthermore, Phebe Novakovic directly owns US$111m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 19% of total compensation represents salary, while the remainder of 81% is other remuneration. In General Dynamics' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

General Dynamics Corporation's Growth

General Dynamics Corporation has seen its earnings per share (EPS) increase by 6.6% a year over the past three years. In the last year, its revenue changed by just 0.7%.

We would argue that the improvement in revenue is good, but isn't particularly impressive, but it is good to see modest EPS growth. So there are some positives here, but not enough to earn high praise. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has General Dynamics Corporation Been A Good Investment?

Given the total shareholder loss of 19% over three years, many shareholders in General Dynamics Corporation are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

As previously discussed, Phebe is compensated close to the median for companies of its size, and which belong to the same industry. Meanwhile, General Dynamics is suffering from adverse shareholder returns and althoughEPS have grown over the past three years, they have not been extraordinary. Although we wouldn't say CEO compensation is exceptionally high, it isn't very low either. Shareholders might want to see substantial improvements in returns before agreeing that Phebe deserves a raise.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for General Dynamics that investors should be aware of in a dynamic business environment.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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