Is Frontier Communications Corporation’s (NASDAQ:FTR) CEO Salary Justified?

Dan McCarthy has been the CEO of Frontier Communications Corporation (NASDAQ:FTR) since 2015. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we’ll consider growth that the business demonstrates. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for Frontier Communications

How Does Dan McCarthy’s Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Frontier Communications Corporation has a market cap of US$104m, and reported total annual CEO compensation of US$7.1m for the year to December 2018. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$1.0m. 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 under US$200m, and the median CEO total compensation was US$510k.

It would therefore appear that Frontier Communications Corporation pays Dan McCarthy more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see a visual representation of the CEO compensation at Frontier Communications, below.

NasdaqGS:FTR CEO Compensation, November 4th 2019
NasdaqGS:FTR CEO Compensation, November 4th 2019

Is Frontier Communications Corporation Growing?

On average over the last three years, Frontier Communications Corporation has shrunk earnings per share by 48% each year (measured with a line of best fit). In the last year, its revenue is down 4.7%.

Unfortunately, earnings per share have trended lower over the last three years. And the impression is worse when you consider revenue is down year-on-year. 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 Frontier Communications Corporation Been A Good Investment?

Since shareholders would have lost about 97% over three years, some Frontier Communications Corporation shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

We compared total CEO remuneration at Frontier Communications Corporation with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us. Just as bad, share price gains for investors have failed to materialize, over the same period. In our opinion the CEO might be paid too generously! Shareholders may want to check for free if Frontier Communications insiders are buying or selling shares.

If you want to buy a stock that is better than Frontier Communications, this free list of high return, low debt companies is a great place to look.

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.