Here's Why Omnicom Group Inc.'s (NYSE:OMC) CEO Compensation Is The Least Of Shareholders Concerns

By
Simply Wall St
Published
April 29, 2021
NYSE:OMC

Performance at Omnicom Group Inc. (NYSE:OMC) has been rather uninspiring recently and shareholders may be wondering how CEO John Wren plans to fix this. At the next AGM coming up on 04 May 2021, they can influence managerial decision making through voting on resolutions, including executive remuneration. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. We think CEO compensation looks appropriate given the data we have put together.

Check out our latest analysis for Omnicom Group

Comparing Omnicom Group Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Omnicom Group Inc. has a market capitalization of US$17b, and reported total annual CEO compensation of US$11m for the year to December 2020. We note that's a decrease of 44% compared to last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$450k.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$21m. Accordingly, Omnicom Group pays its CEO under the industry median. Moreover, John Wren also holds US$83m worth of Omnicom Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20202019Proportion (2020)
Salary US$450k US$1.0m 4%
Other US$11m US$19m 96%
Total CompensationUS$11m US$20m100%

Talking in terms of the industry, salary represented approximately 20% of total compensation out of all the companies we analyzed, while other remuneration made up 80% of the pie. Interestingly, the company has chosen to go down an unconventional route in that it pays a smaller salary to John Wren as compared to non-salary compensation over the one-year period examined. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
NYSE:OMC CEO Compensation April 29th 2021

A Look at Omnicom Group Inc.'s Growth Numbers

Over the last three years, Omnicom Group Inc. has shrunk its earnings per share by 1.9% per year. Its revenue is down 11% over the previous year.

A lack of EPS improvement is not good to see. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Omnicom Group Inc. Been A Good Investment?

Omnicom Group Inc. has generated a total shareholder return of 24% over three years, so most shareholders would be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

To Conclude...

Omnicom Group primarily uses non-salary benefits to reward its CEO. Shareholder returns while positive, need to be looked at along with earnings, which have failed to grow and this could mean that the current momentum may not continue. Shareholders might want to question the board about these concerns, and revisit their investment thesis for the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Omnicom Group that investors should think about before committing capital to this stock.

Important note: Omnicom Group is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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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