Is Power Corporation of Canada’s (TSE:POW) CEO Being Overpaid?

In 1996 Paul Desmarais was appointed CEO of Power Corporation of Canada (TSE:POW). First, this article will compare CEO compensation with compensation at other large companies. Next, we’ll consider growth that the business demonstrates. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Power of Canada

How Does Paul Desmarais’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Power Corporation of Canada has a market cap of CA$15b, and is paying total annual CEO compensation of CA$3.2m. (This number is for the twelve months until December 2017). While we always look at total compensation first, we note that the salary component is less, at CA$600k. When we examined a group of companies with market caps over CA$11b, we found that their median CEO total compensation was CA$8.5m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).

Most shareholders would consider it a positive that Paul Desmarais takes less in total compensation than the CEOs of most other large companies, leaving more for shareholders. While this is a good thing, you’ll need to understand the business better before you can form an opinion.

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

TSX:POW CEO Compensation, April 11th 2019
TSX:POW CEO Compensation, April 11th 2019

Is Power Corporation of Canada Growing?

Earnings per share at Power Corporation of Canada are much the same as they were three years ago, albeit slightly lower, based on the trend. Its revenue is down -6.4% over last year.

In the last three years the company has failed to grow earnings per s. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.

Has Power Corporation of Canada Been A Good Investment?

Power Corporation of Canada has generated a total shareholder return of 20% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary…

It looks like Power Corporation of Canada pays its CEO less than the average at large companies.

Shareholders should note that compensation for Paul Desmarais is under the median of a group of large companies. However, the earnings per share are not moving in the right direction, and the returns to shareholders could have been better. There is room for improved company performance, but we don’t see the CEO pay as a big issue here. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Power of Canada (free visualization of insider trades).

Important note: Power of Canada 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.