InterContinental Hotels Group PLC's (LON:IHG) CEO Compensation Looks Acceptable To Us And Here's Why

Despite InterContinental Hotels Group PLC's (LON:IHG) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. The upcoming AGM on 07 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 what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

See our latest analysis for InterContinental Hotels Group

How Does Total Compensation For Keith Barr Compare With Other Companies In The Industry?

Our data indicates that InterContinental Hotels Group PLC has a market capitalization of UK£9.3b, and total annual CEO compensation was reported as US$1.9m for the year to December 2020. That's a notable decrease of 57% on last year. In particular, the salary of US$972.1k, makes up a fairly large portion of the total compensation being paid to the CEO.

On comparing similar companies in the industry with market capitalizations above UK£5.8b, we found that the median total CEO compensation was US$1.6m. From this we gather that Keith Barr is paid around the median for CEOs in the industry. Moreover, Keith Barr also holds UK£3.9m worth of InterContinental Hotels Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	US$972k	US$1.1m	50%
Other	US$964k	US$3.4m	50%
Total Compensation	US$1.9m	US$4.5m	100%

Talking in terms of the industry, salary represented approximately 79% of total compensation out of all the companies we analyzed, while other remuneration made up 21% of the pie. InterContinental Hotels Group sets aside a smaller share of compensation for salary, in comparison to the overall industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

InterContinental Hotels Group PLC's Growth

Over the last three years, InterContinental Hotels Group PLC has shrunk its earnings per share by 72% per year. Its revenue is down 49% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet 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 InterContinental Hotels Group PLC Been A Good Investment?

InterContinental Hotels Group PLC has served shareholders reasonably well, with a total return of 13% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

Shareholder returns, while positive, should be looked at along with earnings, which have not grown at all recently. This makes us think the share price momentum may slow in the future. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 3 warning signs for InterContinental Hotels Group (of which 1 is a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

If you decide to trade InterContinental Hotels Group, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.