Is LendLease Group’s (ASX:LLC) CEO Being Overpaid?

Steve McCann has been the CEO of LendLease Group (ASX:LLC) since 2008. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. 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 LendLease Group

How Does Steve McCann’s Compensation Compare With Similar Sized Companies?

Our data indicates that LendLease Group is worth AU$6.9b, and total annual CEO compensation is AU$6.4m. (This figure is for the year to June 2018). While we always look at total compensation first, we note that the salary component is less, at AU$2.0m. We looked at a group of companies with market capitalizations from AU$5.6b to AU$17b, and the median CEO total compensation was AU$4.1m.

Thus we can conclude that Steve McCann receives more in total compensation than the median of a group of companies in the same market, and of similar size to LendLease Group. However, this doesn’t necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see, below, how CEO compensation at LendLease Group has changed over time.

ASX:LLC CEO Compensation, April 8th 2019
ASX:LLC CEO Compensation, April 8th 2019

Is LendLease Group Growing?

On average over the last three years, LendLease Group has shrunk earnings per share by 6.0% each year (measured with a line of best fit). In the last year, its revenue is down -10%.

Unfortunately, earnings per share have trended lower over the last three years. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.

Has LendLease Group Been A Good Investment?

With a total shareholder return of 3.0% over three years, LendLease Group has done okay by shareholders. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary…

We examined the amount LendLease Group pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

And shareholder returns are decent but not great. So we doubt many shareholders would consider the CEO pay to be particularly modest! If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at LendLease Group.

Important note: LendLease Group may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.