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Frans van Houten became the CEO of Koninklijke Philips N.V. (AMS:PHIA) in 2011. This analysis aims first to contrast CEO compensation with other large companies. Then we’ll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Frans van Houten’s Compensation Compare With Similar Sized Companies?
According to our data, Koninklijke Philips N.V. has a market capitalization of €33b, and pays its CEO total annual compensation worth €5.4m. (This figure is for the year to December 2018). That’s a modest increase of 5.7% on the prior year year. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at €1.2m. We took a group of companies with market capitalizations over €7.1b, and calculated the median CEO total compensation to be €3.7m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
As you can see, Frans van Houten is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Koninklijke Philips N.V. is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at Koninklijke Philips has changed from year to year.
Is Koninklijke Philips N.V. Growing?
On average over the last three years, Koninklijke Philips N.V. has grown earnings per share (EPS) by 38% each year (using a line of best fit). Its revenue is up 3.6% over last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. It’s also good to see modest revenue growth, suggesting the underlying business is healthy. It could be important to check this free visual depiction of what analysts expect for the future.
Has Koninklijke Philips N.V. Been A Good Investment?
Boasting a total shareholder return of 72% over three years, Koninklijke Philips N.V. has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared the total CEO remuneration paid by Koninklijke Philips N.V., and compared it to remuneration at a group of other large companies. As discussed above, we discovered that the company pays more than the median of that group.
However we must not forget that the EPS growth has been very strong over three years. In addition, shareholders have done well over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. Shareholders may want to check for free if Koninklijke Philips insiders are buying or selling shares.
Important note: Koninklijke Philips 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 firstname.lastname@example.org. 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.