What Can We Conclude About GlaxoSmithKline's (LON:GSK) CEO Pay?

By
Simply Wall St
Published
November 19, 2020
LSE:GSK

This article will reflect on the compensation paid to Emma Walmsley who has served as CEO of GlaxoSmithKline plc (LON:GSK) since 2017. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for GlaxoSmithKline.

Check out our latest analysis for GlaxoSmithKline

How Does Total Compensation For Emma Walmsley Compare With Other Companies In The Industry?

Our data indicates that GlaxoSmithKline plc has a market capitalization of UK£68b, and total annual CEO compensation was reported as UK£8.4m for the year to December 2019. We note that's an increase of 42% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at UK£1.1m.

On comparing similar companies in the industry with market capitalizations above UK£6.0b, we found that the median total CEO compensation was UK£6.7m. This suggests that GlaxoSmithKline remunerates its CEO largely in line with the industry average. Moreover, Emma Walmsley also holds UK£11m worth of GlaxoSmithKline stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20192018Proportion (2019)
Salary UK£1.1m UK£1.0m 13%
Other UK£7.3m UK£4.9m 87%
Total CompensationUK£8.4m UK£5.9m100%

Speaking on an industry level, nearly 44% of total compensation represents salary, while the remainder of 56% is other remuneration. It's interesting to note that GlaxoSmithKline allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
LSE:GSK CEO Compensation November 19th 2020

GlaxoSmithKline plc's Growth

GlaxoSmithKline plc's earnings per share (EPS) grew 39% per year over the last three years. In the last year, its revenue is up 3.6%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has GlaxoSmithKline plc Been A Good Investment?

GlaxoSmithKline plc has generated a total shareholder return of 23% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

As we touched on above, GlaxoSmithKline plc is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But EPS growth over the last three years has been impressive, although the same cannot be said for shareholder returns. As a result of these considerations, we would suggest the compensation is reasonable, but looking ahead shareholders will likely want to see healthier returns.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for GlaxoSmithKline that investors should think about before committing capital to this stock.

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

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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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