Lance Fritz became the CEO of Union Pacific Corporation (NYSE:UNP) in 2015. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. 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.
How Does Lance Fritz’s Compensation Compare With Similar Sized Companies?
Our data indicates that Union Pacific Corporation is worth US$92b, and total annual CEO compensation was reported as US$14m for the year to December 2018. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$1.1m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over US$8.0b, we found that their 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 a sector level, around 21% of total compensation represents salary and 79% is other remuneration. Non-salary compensation represents a greater slice of the remuneration pie for Union Pacific, in sharp contrast to the overall sector.
So Lance Fritz receives a similar amount to the median CEO pay, amongst the companies we looked at. While this data point isn’t particularly informative alone, it gains more meaning when considered with business performance. You can see a visual representation of the CEO compensation at Union Pacific, below.
Is Union Pacific Corporation Growing?
Over the last three years Union Pacific Corporation has seen earnings per share (EPS) move in a positive direction by an average of 11% per year (using a line of best fit). It saw its revenue drop 4.9% over the last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. The lack of revenue growth isn’t ideal, but it is the bottom line that counts most in business. Shareholders might be interested in this free visualization of analyst forecasts.
Has Union Pacific Corporation Been A Good Investment?
With a total shareholder return of 33% over three years, Union Pacific Corporation shareholders would, in general, be reasonably content. 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.
Lance Fritz is paid around what is normal for the leaders of larger companies.
The company is growing EPS but shareholder returns have been sound but not amazing. So upon reflection one could argue that the CEO pay is quite reasonable. Looking into other areas, we’ve picked out 2 warning signs for Union Pacific that investors should think about before committing capital to this stock.
If you want to buy a stock that is better than Union Pacific, this free list of high return, low debt companies is a great place to look.
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