Our View On Frontier Developments' (LON:FDEV) CEO Pay

The CEO of Frontier Developments plc (LON:FDEV) is David Braben, and this article examines the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Frontier Developments.

View our latest analysis for Frontier Developments

Comparing Frontier Developments plc's CEO Compensation With the industry

At the time of writing, our data shows that Frontier Developments plc has a market capitalization of UK£1.2b, and reported total annual CEO compensation of UK£390k for the year to May 2020. We note that's an increase of 26% above last year. In particular, the salary of UK£220.0k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar companies from the same industry with market caps ranging from UK£731m to UK£2.3b, we found that the median CEO total compensation was UK£1.4m. Accordingly, Frontier Developments pays its CEO under the industry median. What's more, David Braben holds UK£397m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Speaking on an industry level, nearly 78% of total compensation represents salary, while the remainder of 22% is other remuneration. It's interesting to note that Frontier Developments allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Frontier Developments plc's Growth

Frontier Developments plc has seen its earnings per share (EPS) increase by 22% a year over the past three years. In the last year, its revenue is down 15%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Frontier Developments plc Been A Good Investment?

Boasting a total shareholder return of 104% over three years, Frontier Developments 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.

To Conclude...

As we touched on above, Frontier Developments plc is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Considering robust EPS growth, we believe David to be modestly paid. Given the strong history of shareholder returns, the shareholders are probably very happy with David's performance.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 1 warning sign for Frontier Developments that investors should be aware of in a dynamic business environment.

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.

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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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