Why We Think The CEO Of Cincinnati Financial Corporation (NASDAQ:CINF) May Soon See A Pay Rise

Shareholders will be pleased by the impressive results for Cincinnati Financial Corporation (NASDAQ:CINF) recently and CEO Steve Johnston has played a key role. This would be kept in mind at the upcoming AGM on 08 May 2021 which will be a chance for them to hear the board review the financial results, discuss future company strategy and vote on resolutions such as executive remuneration and other matters. Here we will show why we think CEO compensation is appropriate and discuss the case for a pay rise.

View our latest analysis for Cincinnati Financial

How Does Total Compensation For Steve Johnston Compare With Other Companies In The Industry?

Our data indicates that Cincinnati Financial Corporation has a market capitalization of US$18b, and total annual CEO compensation was reported as US$3.8m for the year to December 2020. Notably, that's a decrease of 31% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.1m.

For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$11m. This suggests that Steve Johnston is paid below the industry median. What's more, Steve Johnston holds US$34m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, roughly 18% of total compensation represents salary and 82% is other remuneration. Cincinnati Financial is paying a higher share of its remuneration through a salary in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Cincinnati Financial Corporation's Growth

Cincinnati Financial Corporation's earnings per share (EPS) grew 57% per year over the last three years. It achieved revenue growth of 74% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Cincinnati Financial Corporation Been A Good Investment?

Boasting a total shareholder return of 75% over three years, Cincinnati Financial Corporation has done well by shareholders. 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...

Given the company's decent performance, the CEO remuneration policy might not be shareholders' central point of focus in the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for Cincinnati Financial (1 is potentially serious!) 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.

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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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