Is AstraZeneca PLC (LON:AZN) Overpaying Its CEO?

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Pascal Soriot has been the CEO of AstraZeneca PLC (LON:AZN) since 2012. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for AstraZeneca

How Does Pascal Soriot’s Compensation Compare With Similar Sized Companies?

According to our data, AstraZeneca PLC has a market capitalization of UK£75b, and pays its CEO total annual compensation worth US$9.4m. (This is based on the year to December 2017). While we always look at total compensation first, we note that the salary component is less, at US$1.2m. When we examined a group of companies with market caps over UK£6.1b, we found that their median CEO total compensation was UK£3.7m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

Thus we can conclude that Pascal Soriot receives more in total compensation than the median of a group of large companies in the same market as AstraZeneca PLC. However, this doesn’t necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at AstraZeneca has changed from year to year.

LSE:AZN CEO Compensation, May 13th 2019
LSE:AZN CEO Compensation, May 13th 2019

Is AstraZeneca PLC Growing?

Over the last three years AstraZeneca PLC has shrunk its earnings per share by an average of 6.3% per year (measured with a line of best fit). Revenue was pretty flat on last year.

Unfortunately, earnings per share have trended lower over the last three years. And the flat revenue hardly impresses. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.

Has AstraZeneca PLC Been A Good Investment?

Boasting a total shareholder return of 64% over three years, AstraZeneca 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.

In Summary…

We compared total CEO remuneration at AstraZeneca PLC with the amount paid at other large companies. As discussed above, we discovered that the company pays more than the median of that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

But clearly there are some positives, because investors have done well over the same time frame. Given this situation we doubt shareholders are particularly concerned about the CEO compensation. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling AstraZeneca (free visualization of insider trades).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.