How Much Is Cochlear Limited (ASX:COH) CEO Getting Paid?

Dig Howitt has been the CEO of Cochlear Limited (ASX:COH) since 2018, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Cochlear

Comparing Cochlear Limited's CEO Compensation With the industry

At the time of writing, our data shows that Cochlear Limited has a market capitalization of AU$14b, and reported total annual CEO compensation of AU$2.7m for the year to June 2020. That's a notable decrease of 27% on last year. We note that the salary portion, which stands at AU$1.72m constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations over AU$11b , the reported median total CEO compensation was AU$8.5m. In other words, Cochlear pays its CEO lower than the industry median. What's more, Dig Howitt holds AU$9.8m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Speaking on an industry level, nearly 61% of total compensation represents salary, while the remainder of 39% is other remuneration. Cochlear is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Cochlear Limited's Growth Numbers

Over the last three years, Cochlear Limited has shrunk its earnings per share by 29% per year. Its revenue is down 7.5% over the previous year.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Cochlear Limited Been A Good Investment?

Cochlear Limited has served shareholders reasonably well, with a total return of 24% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

As we touched on above, Cochlear Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Over the last three years, shareholder returns have been unexciting, and EPS growth has fared even worse. So, although we can't say CEO compensation is very high, shareholders might want to see an improvement in overall performance before agreeing that Dig deserves a bump.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Cochlear that you should be aware of before investing.

Switching gears from Cochlear, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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