Organon & Co.'s (NYSE:OGN) CEO Might Not Expect Shareholders To Be So Generous This Year

Key Insights

• Organon will host its Annual General Meeting on 4th of June
• CEO Kevin Ali's total compensation includes salary of US$1.24m
• The total compensation is 1,468% higher than the average for the industry
• Organon's EPS declined by 19% over the past three years while total shareholder loss over the past three years was 33%

The results at Organon & Co. (NYSE:OGN) have been quite disappointing recently and CEO Kevin Ali bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 4th of June. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

See our latest analysis for Organon

Comparing Organon & Co.'s CEO Compensation With The Industry

According to our data, Organon & Co. has a market capitalization of US$5.4b, and paid its CEO total annual compensation worth US$15m over the year to December 2023. Notably, that's an increase of 9.6% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.2m.

On examining similar-sized companies in the American Pharmaceuticals industry with market capitalizations between US$4.0b and US$12b, we discovered that the median CEO total compensation of that group was US$946k. Accordingly, our analysis reveals that Organon & Co. pays Kevin Ali north of the industry median. Furthermore, Kevin Ali directly owns US$2.8m worth of shares in the company.

Component	2023	2022	Proportion (2023)
Salary	US$1.2m	US$1.2m	8%
Other	US$14m	US$12m	92%
Total Compensation	US$15m	US$14m	100%

Speaking on an industry level, nearly 29% of total compensation represents salary, while the remainder of 71% is other remuneration. It's interesting to note that Organon allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Organon & Co.'s Growth

Over the last three years, Organon & Co. has shrunk its earnings per share by 19% per year. Its revenue is up 3.3% over the last year.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Organon & Co. Been A Good Investment?

Few Organon & Co. shareholders would feel satisfied with the return of -33% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. In our study, we found 2 warning signs for Organon you should be aware of, and 1 of them makes us a bit uncomfortable.

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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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.