How Should Investors Feel About W.W. Grainger's (NYSE:GWW) CEO Remuneration?

By
Simply Wall St
Published
December 29, 2020

DG Macpherson has been the CEO of W.W. Grainger, Inc. (NYSE:GWW) since 2016, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether W.W. Grainger pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for W.W. Grainger

How Does Total Compensation For DG Macpherson Compare With Other Companies In The Industry?

Our data indicates that W.W. Grainger, Inc. has a market capitalization of US$22b, and total annual CEO compensation was reported as US$7.7m for the year to December 2019. That's a notable decrease of 27% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.1m.

In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$6.2m. From this we gather that DG Macpherson is paid around the median for CEOs in the industry. Moreover, DG Macpherson also holds US$15m worth of W.W. Grainger stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20192018Proportion (2019)
Salary US$1.1m US$1.0m 14%
Other US$6.6m US$9.4m 86%
Total CompensationUS$7.7m US$10m100%

On an industry level, roughly 23% of total compensation represents salary and 77% is other remuneration. It's interesting to note that W.W. Grainger allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

NYSE:GWW CEO Compensation December 29th 2020

W.W. Grainger, Inc.'s Growth

Over the past three years, W.W. Grainger, Inc. has seen its earnings per share (EPS) grow by 12% per year. Its revenue is up 2.6% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has W.W. Grainger, Inc. Been A Good Investment?

We think that the total shareholder return of 85%, over three years, would leave most W.W. Grainger, Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

As previously discussed, DG is compensated close to the median for companies of its size, and which belong to the same industry. Few would be critical of the leadership, since returns have been juicy and EPS are moving in the right direction. So one could argue that CEO compensation is quite modest, if you consider company performance! In fact, shareholders might even think the CEO deserves a raise as a reward due to the fantastic returns generated.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 3 warning signs for W.W. Grainger that investors should be aware of in a dynamic business environment.

Switching gears from W.W. Grainger, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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