In 2017, Simon Breakwell was appointed CEO of AA plc (LON:AA.). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. 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. This method should give us information to assess how appropriately the company pays the CEO.
View our latest analysis for AA
How Does Simon Breakwell's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that AA plc has a market cap of UK£129m, and reported total annual CEO compensation of UK£1.6m for the year to January 2020. That's a notable increase of 8.4% on last year. While we always look at total compensation first, we note that the salary component is less, at UK£700k. We examined companies with market caps from UK£82m to UK£328m, and discovered that the median CEO total compensation of that group was UK£623k.
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of AA. Speaking on an industry level, we can see that nearly 68% of total compensation represents salary, while the remainder of 32% is other remuneration. Non-salary compensation represents a greater slice of the remuneration pie for AA, in sharp contrast to the overall sector.
It would therefore appear that AA plc pays Simon Breakwell more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration 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 AA, below.
Is AA plc Growing?
Over the last three years AA plc has shrunk its earnings per share by an average of 16% per year (measured with a line of best fit). In the last year, its revenue is up 1.6%.
Unfortunately, earnings per share have trended lower over the last three years. The modest increase in revenue in the last year isn't enough to make me overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has AA plc Been A Good Investment?
Since shareholders would have lost about 90% over three years, some AA plc shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
In Summary...
We compared total CEO remuneration at AA plc with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.
We think many shareholders would be underwhelmed with the business growth over the last three years. Over the same period, investors would have come away with nothing in the way of share price gains. And we'd be remiss not to note that the CEO remuneration has increased on last year. Some might well form the view that the CEO is paid too generously! Taking a breather from CEO compensation, we've spotted 2 warning signs for AA (of which 1 is significant!) you should know about in order to have a holistic understanding of the stock.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. 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. Thank you for reading.