Is Washington Real Estate Investment Trust’s (NYSE:WRE) CEO Salary Justified?

In 2013 Paul McDermott was appointed CEO of Washington Real Estate Investment Trust (NYSE:WRE). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for Washington Real Estate Investment Trust

How Does Paul McDermott’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Washington Real Estate Investment Trust has a market cap of US$2.2b, and is paying total annual CEO compensation of US$6.9m. (This figure is for the year to December 2017). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$650k. When we examined a selection of companies with market caps ranging from US$1.0b to US$3.2b, we found the median CEO total compensation was US$3.4m.

Thus we can conclude that Paul McDermott receives more in total compensation than the median of a group of companies in the same market, and of similar size to Washington Real Estate Investment Trust. However, this doesn’t necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see, below, how CEO compensation at Washington Real Estate Investment Trust has changed over time.

NYSE:WRE CEO Compensation, March 18th 2019
NYSE:WRE CEO Compensation, March 18th 2019

Is Washington Real Estate Investment Trust Growing?

On average over the last three years, Washington Real Estate Investment Trust has shrunk earnings per share by 57% each year (measured with a line of best fit). It achieved revenue growth of 3.6% over the last year.

Sadly for shareholders, earnings per share are actually down, over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.

Has Washington Real Estate Investment Trust Been A Good Investment?

With a total shareholder return of 9.7% over three years, Washington Real Estate Investment Trust has done okay by shareholders. 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.

In Summary…

We examined the amount Washington Real Estate Investment Trust pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

And while shareholder returns have been respectable, they have hardly been superb. So you may want to delve deeper, because we don’t think the CEO pay is too low. Shareholders may want to check for free if Washington Real Estate Investment Trust insiders are buying or selling shares.

Important note: Washington Real Estate Investment Trust 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.