This Is Why Legal & General Group Plc's (LON:LGEN) CEO Compensation Looks Appropriate

The share price of Legal & General Group Plc (LON:LGEN) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 20 May 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. 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 Legal & General Group

How Does Total Compensation For Nigel Wilson Compare With Other Companies In The Industry?

At the time of writing, our data shows that Legal & General Group Plc has a market capitalization of UK£16b, and reported total annual CEO compensation of UK£2.0m for the year to December 2020. Notably, that's a decrease of 54% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at UK£974k.

In comparison with other companies in the industry with market capitalizations over UK£5.7b , the reported median total CEO compensation was UK£1.9m. From this we gather that Nigel Wilson is paid around the median for CEOs in the industry. Furthermore, Nigel Wilson directly owns UK£10m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	UK£974k	UK£942k	49%
Other	UK£995k	UK£3.4m	51%
Total Compensation	UK£2.0m	UK£4.3m	100%

On an industry level, roughly 39% of total compensation represents salary and 61% is other remuneration. According to our research, Legal & General Group has allocated a higher percentage of pay to salary in comparison to the wider industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Legal & General Group Plc's Growth

Legal & General Group Plc has reduced its earnings per share by 10% a year over the last three years. In the last year, its revenue is down 8.6%.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Legal & General Group Plc Been A Good Investment?

With a total shareholder return of 21% over three years, Legal & General Group Plc shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 2 warning signs for Legal & General Group (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Switching gears from Legal & General Group, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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