Is Pearson plc (LON:PSON) Excessively Paying Its CEO?

In 2013 John Fallon was appointed CEO of Pearson plc (LON:PSON). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Pearson

How Does John Fallon’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Pearson plc has a market cap of UK£7.1b, and is paying total annual CEO compensation of UK£1.8m. That’s a notable increase of 16% on last year. When we examined a selection of companies with market caps ranging from UK£3.1b to UK£9.2b, we found the median CEO compensation was UK£2.5m.

So John Fallon is paid around the average of the companies we looked at. While this data point isn’t particularly informative alone, it gains more meaning when considered with business performance.

You can see a visual representation of the CEO compensation at Pearson, below.

LSE:PSON CEO Compensation November 16th 18
LSE:PSON CEO Compensation November 16th 18

Is Pearson plc Growing?

Over the last three years Pearson plc has grown its earnings per share (EPS) by an average of 8.6% per year. It saw its revenue drop -8.5% over the last year.

I generally like to see a little revenue growth, but it is good to see EPS growth. These two metric are moving in different directions, so while it’s hard to be confident judging performance, we think the stock is worth watching.

You might want to check this free visual report on analyst forecasts for future earnings.

Has Pearson plc Been A Good Investment?

Boasting a total shareholder return of 37% over three years, Pearson plc has done well by shareholders. So they may not be at all concerned if the CEO is paid more than is normal for companies around the same size.

In Summary…

John Fallon is paid around the same as most CEOs of similar size companies.

The company isn’t showing particularly great growth, but shareholder returns have been pleasing. So considering most shareholders would be happy, we’d say the CEO pay is appropriate. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Pearson plc.

Or you might rather take a peek at this analytical visualization of historic cash flow, earnings and revenue.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.