Shareholders May Not Be So Generous With Philip Morris International Inc.'s (NYSE:PM) CEO Compensation And Here's Why

Key Insights

• Philip Morris International's Annual General Meeting to take place on 8th of May
• Salary of US$1.65m is part of CEO Jacek Olczak's total remuneration
• The overall pay is 345% above the industry average
• Over the past three years, Philip Morris International's EPS fell by 2.7% and over the past three years, the total shareholder return was 18%

The share price of Philip Morris International Inc. (NYSE:PM) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 8th of May. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for Philip Morris International

How Does Total Compensation For Jacek Olczak Compare With Other Companies In The Industry?

At the time of writing, our data shows that Philip Morris International Inc. has a market capitalization of US$148b, and reported total annual CEO compensation of US$25m for the year to December 2023. That's a notable increase of 62% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.6m.

For comparison, other companies in the the US Tobacco industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$5.7m. This suggests that Jacek Olczak is paid more than the median for the industry. Moreover, Jacek Olczak also holds US$31m worth of Philip Morris International stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	US$1.6m	US$1.5m	6%
Other	US$24m	US$14m	94%
Total Compensation	US$25m	US$16m	100%

On an industry level, roughly 71% of total compensation represents salary and 29% is other remuneration. Philip Morris International pays a modest slice of remuneration through salary, as compared 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.

Philip Morris International Inc.'s Growth

Over the last three years, Philip Morris International Inc. has shrunk its earnings per share by 2.7% per year. It achieved revenue growth of 12% over the last year.

Its a bit disappointing to see that the company has failed to grow its EPS. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. 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 Philip Morris International Inc. Been A Good Investment?

Philip Morris International Inc. has served shareholders reasonably well, with a total return of 18% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

In Summary...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 3 warning signs for Philip Morris International (1 is a bit unpleasant!) that you should be aware of before investing here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.