Ferguson plc's (NYSE:FERG) CEO Looks Due For A Compensation Raise

Key Insights

• Ferguson will host its Annual General Meeting on 28th of November
• CEO Kevin Murphy's total compensation includes salary of US$1.19m
• The overall pay is 45% below the industry average
• Over the past three years, Ferguson's EPS grew by 29% and over the past three years, the total shareholder return was 64%

The impressive results at Ferguson plc (NYSE:FERG) recently will be great news for shareholders. At the upcoming AGM on 28th of November, they would be interested to hear about the company strategy going forward and get a chance to cast their votes on resolutions such as executive remuneration and other company matters. Here we will show why we think CEO compensation is appropriate and discuss the case for a pay rise.

See our latest analysis for Ferguson

Comparing Ferguson plc's CEO Compensation With The Industry

At the time of writing, our data shows that Ferguson plc has a market capitalization of US$34b, and reported total annual CEO compensation of US$5.4m for the year to July 2023. Notably, that's an increase of 12% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.2m.

On comparing similar companies in the American Trade Distributors industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$10.0m. That is to say, Kevin Murphy is paid under the industry median. Furthermore, Kevin Murphy directly owns US$21m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	US$1.2m	US$1.2m	22%
Other	US$4.2m	US$3.7m	78%
Total Compensation	US$5.4m	US$4.9m	100%

On an industry level, around 16% of total compensation represents salary and 84% is other remuneration. Ferguson is paying a higher share of its remuneration through a salary in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Ferguson plc's Growth Numbers

Ferguson plc's earnings per share (EPS) grew 29% per year over the last three years. In the last year, its revenue is up 4.1%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Ferguson plc Been A Good Investment?

Most shareholders would probably be pleased with Ferguson plc for providing a total return of 64% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Seeing that the company has put in a relatively good performance, the CEO remuneration policy may not be the focus at the AGM. Instead, investors might be more interested in discussions that would help manage their longer-term growth expectations such as company business strategies and future growth potential.

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. We did our research and spotted 3 warning signs for Ferguson 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.