Tod Carpenter became the CEO of Donaldson Company, Inc. (NYSE:DCI) in 2015, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Donaldson Company pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
How Does Total Compensation For Tod Carpenter Compare With Other Companies In The Industry?
Our data indicates that Donaldson Company, Inc. has a market capitalization of US$7.7b, and total annual CEO compensation was reported as US$5.5m for the year to July 2020. Notably, that's a decrease of 13% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.0m.
For comparison, other companies in the same industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$6.7m. This suggests that Donaldson Company remunerates its CEO largely in line with the industry average. What's more, Tod Carpenter holds US$12m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 17% of total compensation represents salary, while the remainder of 83% is other remuneration. According to our research, Donaldson Company has allocated a higher percentage of pay to salary in comparison to the wider industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Donaldson Company, Inc.'s Growth
Donaldson Company, Inc.'s earnings per share (EPS) grew 3.9% per year over the last three years. Its revenue is down 9.6% over the previous year.
We would prefer it if there was revenue growth, but the modest improvement in EPS is good. It's hard to reach a conclusion about business performance right now. This may be one to watch. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Donaldson Company, Inc. Been A Good Investment?
Boasting a total shareholder return of 36% over three years, Donaldson Company, Inc. 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.
As we noted earlier, Donaldson Company pays its CEO in line with similar-sized companies belonging to the same industry. However, the company's EPS growth numbers over the last three years is not that impressive. On the other hand, shareholder returns over the same period have been very healthy. So while shareholders shouldn't be overly concerned about CEO compensation, we suspect most would prefer to see improved performance, before a bump in pay.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 1 warning sign for Donaldson Company that investors should look into moving forward.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.
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