Despite strong share price growth of 56% for Rentokil Initial plc (LON:RTO) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 12 May 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. 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 Andy Ransom Compare With Other Companies In The Industry?
According to our data, Rentokil Initial plc has a market capitalization of UK£9.0b, and paid its CEO total annual compensation worth UK£4.1m over the year to December 2020. We note that's a small decrease of 4.1% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at UK£656k.
In comparison with other companies in the industry with market capitalizations over UK£5.7b , the reported median total CEO compensation was UK£4.1m. So it looks like Rentokil Initial compensates Andy Ransom in line with the median for the industry. What's more, Andy Ransom holds UK£7.6m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, around 65% of total compensation represents salary and 35% is other remuneration. Rentokil Initial sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Rentokil Initial plc's Growth
Rentokil Initial plc has reduced its earnings per share by 35% a year over the last three years. Its revenue is up 4.0% over the last year.
Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Rentokil Initial plc Been A Good Investment?
Boasting a total shareholder return of 56% over three years, Rentokil Initial plc has done well by shareholders. 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.
While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. 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 an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We identified 2 warning signs for Rentokil Initial (1 can't be ignored!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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