This article will reflect on the compensation paid to Gurmeet Singh who has served as CEO of Johnson Controls-Hitachi Air Conditioning India Limited (NSE:JCHAC) since 2017. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Johnson Controls-Hitachi Air Conditioning India.
Comparing Johnson Controls-Hitachi Air Conditioning India Limited's CEO Compensation With the industry
At the time of writing, our data shows that Johnson Controls-Hitachi Air Conditioning India Limited has a market capitalization of ₹75b, and reported total annual CEO compensation of ₹19m for the year to March 2020. That's mostly flat as compared to the prior year's compensation. We note that the salary portion, which stands at ₹15.8m constitutes the majority of total compensation received by the CEO.
On examining similar-sized companies in the industry with market capitalizations between ₹29b and ₹117b, we discovered that the median CEO total compensation of that group was ₹33m. That is to say, Gurmeet Singh is paid under the industry median.
Speaking on an industry level, nearly 95% of total compensation represents salary, while the remainder of 5.3% is other remuneration. In Johnson Controls-Hitachi Air Conditioning India's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at Johnson Controls-Hitachi Air Conditioning India Limited's Growth Numbers
Johnson Controls-Hitachi Air Conditioning India Limited has reduced its earnings per share by 27% a year over the last three years. It saw its revenue drop 40% over the last year.
Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Has Johnson Controls-Hitachi Air Conditioning India Limited Been A Good Investment?
Johnson Controls-Hitachi Air Conditioning India Limited has generated a total shareholder return of 3.5% over three years, so most shareholders wouldn't be too disappointed. 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.
As previously discussed, Gurmeet is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Over the last three years, shareholder returns have been unexciting, and EPS growth has fared even worse. So, although we can't say CEO compensation is very high, shareholders might want to see an improvement in overall performance before agreeing that Gurmeet deserves a bump.
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. That's why we did some digging and identified 1 warning sign for Johnson Controls-Hitachi Air Conditioning India 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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