In 2017, Ross Taylor was appointed CEO of Fletcher Building Limited (NZSE:FBU). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. 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 Fletcher Building
How Does Ross Taylor's Compensation Compare With Similar Sized Companies?
According to our data, Fletcher Building Limited has a market capitalization of NZ$3.3b, and paid its CEO total annual compensation worth NZ$5.3m over the year to June 2019. We think total compensation is more important but we note that the CEO salary is lower, at NZ$2.1m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations from NZ$1.5b to NZ$4.9b, and the median CEO total compensation was NZ$1.8m.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Fletcher Building stands. Speaking on an industry level, we can see that nearly 47% of total compensation represents salary, while the remainder of 53% is other remuneration. Fletcher Building is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation
It would therefore appear that Fletcher Building Limited pays Ross Taylor more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration 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. You can see a visual representation of the CEO compensation at Fletcher Building, below.
Is Fletcher Building Limited Growing?
Over the last three years Fletcher Building Limited has seen earnings per share (EPS) move in a positive direction by an average of 3.3% per year (using a line of best fit). The trailing twelve months of revenue was pretty much the same as the prior period.
I'm not particularly impressed by the revenue growth, but the modest improvement in EPS is good. Considering these factors I'd say performance has been pretty decent, though not amazing. Shareholders might be interested in this free visualization of analyst forecasts.
Has Fletcher Building Limited Been A Good Investment?
Given the total loss of 41% over three years, many shareholders in Fletcher Building Limited are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
In Summary...
We examined the amount Fletcher Building Limited pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
While we have not been overly impressed by the business performance, the shareholder returns, over three years, have been disappointing. Shareholders may wish to consider further research. Although we don't think the CEO pay is too high, it is probably more on the generous side of things. Shifting gears from CEO pay for a second, we've picked out 2 warning signs for Fletcher Building that investors should be aware of in a dynamic business environment.
Of course, you might find a fantastic investment by looking elsewhere. 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. Thank you for reading.