Canadian National Railway Company (TSE:CNR) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 27 April 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
How Does Total Compensation For JJ Ruest Compare With Other Companies In The Industry?
At the time of writing, our data shows that Canadian National Railway Company has a market capitalization of CA$105b, and reported total annual CEO compensation of CA$11m for the year to December 2020. That's a notable increase of 21% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$1.1m.
For comparison, other companies in the industry with market capitalizations above CA$10b, reported a median total CEO compensation of CA$10m. This suggests that Canadian National Railway remunerates its CEO largely in line with the industry average. What's more, JJ Ruest holds CA$26m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Talking in terms of the industry, salary represented approximately 16% of total compensation out of all the companies we analyzed, while other remuneration made up 84% of the pie. It's interesting to note that Canadian National Railway allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Canadian National Railway Company's Growth
Over the last three years, Canadian National Railway Company has shrunk its earnings per share by 12% per year. It saw its revenue drop 7.4% over the last year.
Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. 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 Canadian National Railway Company Been A Good Investment?
We think that the total shareholder return of 52%, over three years, would leave most Canadian National Railway Company shareholders smiling. 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.
Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 1 warning sign for Canadian National Railway that investors should look into moving forward.
Important note: Canadian National Railway is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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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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