Is Power Corporation of Canada’s (TSE:POW) CEO Pay Justified?

Paul Desmarais became the CEO of Power Corporation of Canada (TSE:POW) in 1996. First, this article will compare CEO compensation with compensation at similar sized companies. Next, we’ll consider growth that the business demonstrates. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for Power of Canada

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

Our data indicates that Power Corporation of Canada is worth CA$12b, and total annual CEO compensation is CA$3.2m. (This number is for the twelve months until 2017). While we always look at total compensation first, we note that the salary component is less, at CA$600k. We looked at a group of companies with market capitalizations from CA$5.4b to CA$16b, and the median CEO compensation was CA$5.5m.

This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. Though positive, it’s important we delve into the performance of the actual business.

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

TSX:POW CEO Compensation December 21st 18
TSX:POW CEO Compensation December 21st 18

Is Power Corporation of Canada Growing?

Over the last three years Power Corporation of Canada has shrunk its earnings per share by an average of 4.0% per year. It achieved revenue growth of 6.3% over the last year.

Sadly for shareholders, earnings per share are actually down, over three years. And the modest revenue growth over 12 months isn’t much comfort against the reduced earnings per share. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration.

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

Has Power Corporation of Canada Been A Good Investment?

Given the total loss of 6.3% over three years, many shareholders in Power Corporation of Canada are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

It appears that Power Corporation of Canada remunerates its CEO below most similar sized companies.

Shareholders should note that compensation for Paul Desmarais is under the median of a group of similar sized companies. But then, EPS growth is lacking and so are the returns to shareholders. While one could argue it is appropriate for the CEO to be paid less than other CEOs of similar sized companies, given company performance, we would not call the pay overly generous. Whatever your view on compensation, you might want to check if insiders are buying or selling Power of Canada shares (free trial).

Or you could feast your eyes on this interactive graph depicting past earnings, cash flow 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.