Is The Go-Ahead Group plc (LON:GOG) Excessively Paying Its CEO?

David Brown has been the CEO of The Go-Ahead Group plc (LON:GOG) since 2011. First, this article will compare CEO compensation with compensation at similar sized 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.

Check out our latest analysis for Go-Ahead Group

How Does David Brown’s Compensation Compare With Similar Sized Companies?

Our data indicates that The Go-Ahead Group plc is worth UK£855m, and total annual CEO compensation is UK£1.2m. (This is based on the year to June 2018). We think total compensation is more important but we note that the CEO salary is lower, at UK£556k. We examined companies with market caps from UK£329m to UK£1.3b, and discovered that the median CEO total compensation of that group was UK£971k.

So David Brown is paid around the average of the companies we looked at. This doesn’t tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.

The graphic below shows how CEO compensation at Go-Ahead Group has changed from year to year.

LSE:GOG CEO Compensation, August 18th 2019
LSE:GOG CEO Compensation, August 18th 2019

Is The Go-Ahead Group plc Growing?

Over the last three years The Go-Ahead Group plc has shrunk its earnings per share by an average of 1.9% per year (measured with a line of best fit). Its revenue is down -1.2% over last year.

In the last three years the company has failed to grow earnings per share. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO.

Has The Go-Ahead Group plc Been A Good Investment?

With a total shareholder return of 23% over three years, The Go-Ahead 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…

David Brown is paid around the same as most CEOs of similar size companies.

We’re not seeing great strides in earnings per share, and total returns were decent but not amazing in the last three years. We’re not saying the CEO pay is too generous, but it’s probably fair to say that many shareholders would like to see improved performance, before any pay rise occurs. Whatever your view on compensation, you might want to check if insiders are buying or selling Go-Ahead Group shares (free trial).

Important note: Go-Ahead Group may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

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.