Jim Torgerson became the CEO of Avangrid, Inc. (NYSE:AGR) in 2015. First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. 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 Jim Torgerson’s Compensation Compare With Similar Sized Companies?
According to our data, Avangrid, Inc. has a market capitalization of US$12b, and paid its CEO total annual compensation worth US$5.7m over the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$1.1m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations over US$8.0b and the 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.
Now let’s take a look at the pay mix on an industry and company level to gain a better understanding of where Avangrid stands. Talking in terms of the sector, salary represented approximately 16% of total compensation out of all the companies we analysed, while other remuneration made up 84% of the pie. So it seems like there isn’t a significant difference between Avangrid and the broader market, in terms of salary allocation in the overall compensation package.
At first glance this seems like a real positive for shareholders, since Jim Torgerson is paid less than the average total compensation paid by other large companies. Though positive, it’s important we delve into the performance of the actual business. The graphic below shows how CEO compensation at Avangrid has changed from year to year.
Is Avangrid, Inc. Growing?
Over the last three years, Avangrid, Inc. has not seen its earnings per share change much, though they have deteriorated slightly, according to a line of best fit. It saw its revenue drop 2.2% over the last year.
In the last three years the company has failed to grow earnings per share. And the impression is worse when you consider revenue is down year-on-year. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Shareholders might be interested in this free visualization of analyst forecasts.
Has Avangrid, Inc. Been A Good Investment?
Avangrid, Inc. has generated a total shareholder return of 3.0% over three years, so most shareholders wouldn’t be too disappointed. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.
Avangrid, Inc. is currently paying its CEO below what is normal for large companies.
Jim Torgerson is remunerated more modestly than is a normal at most large companies. But the business isn’t growing earnings per share, and the returns to shareholders haven’t been wonderful. We would like to see EPS growth from the business, although we wouldn’t say the CEO pay is high. On another note, Avangrid has 3 warning signs (and 1 which shouldn’t be ignored) we think you should know about.
Important note: Avangrid 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.
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