Here's What We Think About Woolworths Group's (ASX:WOW) CEO Pay

This article will reflect on the compensation paid to Brad Banducci who has served as CEO of Woolworths Group Limited (ASX:WOW) since 2016. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Woolworths Group.

View our latest analysis for Woolworths Group

Comparing Woolworths Group Limited's CEO Compensation With the industry

According to our data, Woolworths Group Limited has a market capitalization of AU$52b, and paid its CEO total annual compensation worth AU$6.1m over the year to June 2020. We note that's a decrease of 21% compared to last year. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$2.6m.

For comparison, other companies in the industry with market capitalizations above AU$10b, reported a median total CEO compensation of AU$6.8m. So it looks like Woolworths Group compensates Brad Banducci in line with the median for the industry. Furthermore, Brad Banducci directly owns AU$14m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 53% of total compensation out of all the companies we analyzed, while other remuneration made up 47% of the pie. Woolworths Group sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Woolworths Group Limited's Growth Numbers

Over the last three years, Woolworths Group Limited has shrunk its earnings per share by 5.8% per year. In the last year, its revenue is up 6.2%.

Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Woolworths Group Limited Been A Good Investment?

Most shareholders would probably be pleased with Woolworths Group Limited for providing a total return of 64% 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, Brad is compensated close to the median for companies of its size, and which belong to the same industry. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. On the flip side, shareholder returns have been strong over the same time, which is certainly a positive sign. We wouldn't say CEO compensation is too high, but shareholders will probably want to see an increase in EPS before agreeing the business should pay any more.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 4 warning signs for Woolworths Group that investors should look into moving forward.

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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