Despite strong share price growth of 36% for TE Connectivity Ltd. (NYSE:TEL) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 10 March 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
How Does Total Compensation For Terrence Curtin Compare With Other Companies In The Industry?
Our data indicates that TE Connectivity Ltd. has a market capitalization of US$43b, and total annual CEO compensation was reported as US$11m for the year to September 2020. We note that's an increase of 14% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.2m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$9.0m. So it looks like TE Connectivity compensates Terrence Curtin in line with the median for the industry. Moreover, Terrence Curtin also holds US$12m worth of TE Connectivity stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Speaking on an industry level, nearly 33% of total compensation represents salary, while the remainder of 67% is other remuneration. In TE Connectivity's case, non-salary compensation represents a greater slice of total remuneration, 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.
TE Connectivity Ltd.'s Growth
Over the last three years, TE Connectivity Ltd. has shrunk its earnings per share by 55% per year. In the last year, its revenue is down 5.6%.
The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has TE Connectivity Ltd. Been A Good Investment?
We think that the total shareholder return of 36%, over three years, would leave most TE Connectivity Ltd. shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 4 warning signs for TE Connectivity that investors should be aware of in a dynamic business environment.
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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