Is W.W. Grainger, Inc.’s (NYSE:GWW) CEO Being Overpaid?

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In 2016 DG Macpherson was appointed CEO of W.W. Grainger, Inc. (NYSE:GWW). This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. 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.

Check out our latest analysis for W.W. Grainger

How Does DG Macpherson’s Compensation Compare With Similar Sized Companies?

According to our data, W.W. Grainger, Inc. has a market capitalization of US$15b, and pays its CEO total annual compensation worth US$10m. (This number is for the twelve months until December 2018). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$1.0m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.

So DG Macpherson receives a similar amount to the median CEO pay, amongst the companies we looked at. While this data point isn’t particularly informative alone, it gains more meaning when considered with business performance.

The graphic below shows how CEO compensation at W.W. Grainger has changed from year to year.

NYSE:GWW CEO Compensation, July 9th 2019
NYSE:GWW CEO Compensation, July 9th 2019

Is W.W. Grainger, Inc. Growing?

On average over the last three years, W.W. Grainger, Inc. has grown earnings per share (EPS) by 10.0% each year (using a line of best fit). It achieved revenue growth of 5.7% over the last year.

I’m not particularly impressed by the revenue growth, but it is good to see modest EPS growth. So there are some positives here, but not enough to earn high praise.

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

W.W. Grainger, Inc. has served shareholders reasonably well, with a total return of 22% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary…

DG Macpherson is paid around what is normal the leaders of larger companies.

The company isn’t showing particularly great growth, and shareholder turns haven’t been particularly inspiring in the last few years. While there is room for improvement, we haven’t seen evidence to suggest the pay is too generous. So you may want to check if insiders are buying W.W. Grainger shares with their own money (free access).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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 editorial-team@simplywallst.com. 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.