Dan Glaser became the CEO of Marsh & McLennan Companies, Inc. (NYSE:MMC) in 2013. This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
See our latest analysis for Marsh & McLennan Companies
How Does Dan Glaser's Compensation Compare With Similar Sized Companies?
According to our data, Marsh & McLennan Companies, Inc. has a market capitalization of US$40b, and paid its CEO total annual compensation worth US$17m over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$1.5m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$12m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Talking in terms of the sector, salary represented approximately 22% of total compensation out of all the companies we analysed, while other remuneration made up 78% of the pie. It's interesting to note that Marsh & McLennan Companies allocates a smaller portion of compensation to salary in comparison to the broader industry.
As you can see, Dan Glaser is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Marsh & McLennan Companies, Inc. is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance. The graphic below shows how CEO compensation at Marsh & McLennan Companies has changed from year to year.
Is Marsh & McLennan Companies, Inc. Growing?
Marsh & McLennan Companies, Inc. has reduced its earnings per share by an average of 4.3% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is up 11%.
Sadly for shareholders, earnings per share are actually down, over three years. While the revenue growth is good to see, it is outweighed by the fact that earnings per share are down, over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. You might want to check this free visual report on analyst forecasts for future earnings.
Has Marsh & McLennan Companies, Inc. Been A Good Investment?
With a total shareholder return of 15% over three years, Marsh & McLennan Companies, Inc. shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
In Summary...
We compared the total CEO remuneration paid by Marsh & McLennan Companies, Inc., and compared it to remuneration at a group of other large companies. Our data suggests that it pays above the median CEO pay within that group.
We think many shareholders would be underwhelmed with the business growth over the last three years. And shareholder returns are decent but not great. So we think more research is needed, but we don't think the CEO underpaid. Looking into other areas, we've picked out 1 warning sign for Marsh & McLennan Companies that investors should think about before committing capital to this stock.
Important note: Marsh & McLennan Companies may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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.
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