The Estée Lauder Companies Inc.'s (NYSE:EL) CEO Might Not Expect Shareholders To Be So Generous This Year

Key Insights

• Estée Lauder Companies' Annual General Meeting to take place on 17th of November
• Salary of US$2.10m is part of CEO Fabrizio Freda's total remuneration
• The overall pay is 510% above the industry average
• Over the past three years, Estée Lauder Companies' EPS fell by 3.4% and over the past three years, the total loss to shareholders 54%

Shareholders will probably not be too impressed with the underwhelming results at The Estée Lauder Companies Inc. (NYSE:EL) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 17th of November. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for Estée Lauder Companies

How Does Total Compensation For Fabrizio Freda Compare With Other Companies In The Industry?

At the time of writing, our data shows that The Estée Lauder Companies Inc. has a market capitalization of US$41b, and reported total annual CEO compensation of US$22m for the year to June 2023. That's a notable decrease of 14% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$2.1m.

For comparison, other companies in the American Personal Products industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$3.6m. Accordingly, our analysis reveals that The Estée Lauder Companies Inc. pays Fabrizio Freda north of the industry median. What's more, Fabrizio Freda holds US$22m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	US$2.1m	US$2.1m	10%
Other	US$20m	US$23m	90%
Total Compensation	US$22m	US$25m	100%

Speaking on an industry level, nearly 58% of total compensation represents salary, while the remainder of 42% is other remuneration. In Estée Lauder Companies' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at The Estée Lauder Companies Inc.'s Growth Numbers

The Estée Lauder Companies Inc. has reduced its earnings per share by 3.4% a year over the last three years. In the last year, its revenue is down 10%.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 The Estée Lauder Companies Inc. Been A Good Investment?

The return of -54% over three years would not have pleased The Estée Lauder Companies Inc. shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 4 warning signs for Estée Lauder Companies you should be aware of, and 1 of them makes us a bit uncomfortable.

Switching gears from Estée Lauder Companies, 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.

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.