Is Graham Holdings Company’s (NYSE:GHC) CEO Being Overpaid?

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Tim O’Shaughnessy has been the CEO of Graham Holdings Company (NYSE:GHC) since 2015. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Graham Holdings

How Does Tim O’Shaughnessy’s Compensation Compare With Similar Sized Companies?

Our data indicates that Graham Holdings Company is worth US$3.7b, and total annual CEO compensation is US$3.0m. (This is based on the year to December 2018). That’s a notable increase of 106% on last year. We think total compensation is more important but we note that the CEO salary is lower, at US$750k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$2.0b to US$6.4b. The median total CEO compensation was US$5.3m.

A first glance this seems like a real positive for shareholders, since Tim O’Shaughnessy is paid less than the average total compensation paid by similar sized companies. However, before we heap on the praise, we should delve deeper to understand business performance.

You can see a visual representation of the CEO compensation at Graham Holdings, below.

NYSE:GHC CEO Compensation, June 6th 2019
NYSE:GHC CEO Compensation, June 6th 2019

Is Graham Holdings Company Growing?

Over the last three years Graham Holdings Company has grown its earnings per share (EPS) by an average of 62% per year (using a line of best fit). In the last year, its revenue is up 2.3%.

This demonstrates that the company has been improving recently. A good result. It’s also good to see modest revenue growth, suggesting the underlying business is healthy. We don’t have analyst forecasts, but you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Graham Holdings Company Been A Good Investment?

I think that the total shareholder return of 41%, over three years, would leave most Graham Holdings Company shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary…

Graham Holdings Company is currently paying its CEO below what is normal for companies of its size. Considering the underlying business is growing earnings, this would suggest the pay is modest. The pleasing shareholder returns are the cherry on top; you might even consider that Tim O’Shaughnessy deserves a raise!

It’s not often we see shareholders do so well, and yet the CEO is paid modestly. It would be even more positive if company insiders are buying shares. So you may want to check if insiders are buying Graham Holdings shares with their own money (free access).

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.

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.