In 2017 Ludwig Hantson was appointed CEO of Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN). First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Ludwig Hantson’s Compensation Compare With Similar Sized Companies?
According to our data, Alexion Pharmaceuticals, Inc. has a market capitalization of US$20b, and paid its CEO total annual compensation worth US$19m over the year to December 2019. Notably, that’s an increase of 15% over the year before. While we always look at total compensation first, we note that the salary component is less, at US$1.3m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$12m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.
Next, let’s break down remuneration compositions to understand how the industry and company compare with each other. On an industry level, roughly 22% of total compensation represents salary and 78% is other remuneration. Non-salary compensation represents a greater slice of the remuneration pie for Alexion Pharmaceuticals, in sharp contrast to the overall sector.
As you can see, Ludwig Hantson is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Alexion Pharmaceuticals, Inc. is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business. You can see, below, how CEO compensation at Alexion Pharmaceuticals has changed over time.
Is Alexion Pharmaceuticals, Inc. Growing?
On average over the last three years, Alexion Pharmaceuticals, Inc. has seen earnings per share (EPS) move in a favourable direction by 61% each year (using a line of best fit). Its revenue is up 21% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. Shareholders might be interested in this free visualization of analyst forecasts.
Has Alexion Pharmaceuticals, Inc. Been A Good Investment?
Given the total loss of 24% over three years, many shareholders in Alexion Pharmaceuticals, Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
We examined the amount Alexion Pharmaceuticals, Inc. pays its CEO, and compared it to the amount paid by other large companies. As discussed above, we discovered that the company pays more than the median of that group.
However we must not forget that the EPS growth has been very strong over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. This contrasts with the growth in CEO remuneration, in the last year. While EPS is moving in the right direction, we’d say shareholders would want better returns before the CEO is paid much more. Looking into other areas, we’ve picked out 1 warning sign for Alexion Pharmaceuticals that investors should think about before committing capital to this stock.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
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