Shareholders May Not Be So Generous With Johnson Controls International plc's (NYSE:JCI) CEO Compensation And Here's Why

By
Simply Wall St
Published
March 03, 2021
NYSE:JCI
Source: Shutterstock

The share price of Johnson Controls International plc (NYSE:JCI) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 10 March 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

See our latest analysis for Johnson Controls International

Comparing Johnson Controls International plc's CEO Compensation With the industry

At the time of writing, our data shows that Johnson Controls International plc has a market capitalization of US$42b, and reported total annual CEO compensation of US$14m for the year to September 2020. Notably, that's a decrease of 11% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.3m.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$6.9m. Hence, we can conclude that George Oliver is remunerated higher than the industry median. What's more, George Oliver holds US$66m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary US$1.3m US$1.5m 10%
Other US$12m US$14m 90%
Total CompensationUS$14m US$15m100%

Talking in terms of the industry, salary represented approximately 17% of total compensation out of all the companies we analyzed, while other remuneration made up 83% of the pie. It's interesting to note that Johnson Controls International 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.

ceo-compensation
NYSE:JCI CEO Compensation March 4th 2021

Johnson Controls International plc's Growth

Over the last three years, Johnson Controls International plc has shrunk its earnings per share by 5.8% per year. In the last year, its revenue is down 8.3%.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Johnson Controls International plc Been A Good Investment?

Boasting a total shareholder return of 70% over three years, Johnson Controls International plc 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.

In Summary...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

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. That's why we did some digging and identified 3 warning signs for Johnson Controls International that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. 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.
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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.