Is Roche Holding AG’s (VTX:ROG) CEO Pay Justified?

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Severin Schwan became the CEO of Roche Holding AG (VTX:ROG) in 2008. This analysis aims first to contrast CEO compensation with 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 process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Roche Holding

How Does Severin Schwan’s Compensation Compare With Similar Sized Companies?

According to our data, Roche Holding AG has a market capitalization of CHF235b, and pays its CEO total annual compensation worth CHF12m. (This is based on the year to December 2018). That’s actually a decrease on the year before. We think total compensation is more important but we note that the CEO salary is lower, at CHF4.0m. We looked at a group of companies with market capitalizations over CHF7.8b and the median CEO total compensation was CHF4.2m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

Thus we can conclude that Severin Schwan receives more in total compensation than the median of a group of large companies in the same market as Roche Holding AG. 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 a visual representation of the CEO compensation at Roche Holding, below.

SWX:ROG CEO Compensation, July 1st 2019
SWX:ROG CEO Compensation, July 1st 2019

Is Roche Holding AG Growing?

Over the last three years Roche Holding AG has grown its earnings per share (EPS) by an average of 4.8% per year (using a line of best fit). In the last year, its revenue is up 6.7%.

I would argue that the improvement in revenue isn’t particularly impressive, but I’m happy with the modest EPS growth. Considering these factors I’d say performance has been pretty decent, though not amazing.

Has Roche Holding AG Been A Good Investment?

Roche Holding AG has generated a total shareholder return of 18% 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…

We compared total CEO remuneration at Roche Holding AG with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.

We generally prefer to see stronger EPS growth, and we’re not particularly impressed with the total shareholder return, over the last three years. Considering this, we wouldn’t want to see any big pay rises, although we’d stop short of calling the CEO compensation unfair. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Roche Holding (free visualization of insider trades).

Important note: Roche Holding 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.