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In 2010 Tom Fanning was appointed CEO of The Southern Company (NYSE:SO). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Tom Fanning’s Compensation Compare With Similar Sized Companies?
According to our data, The Southern Company has a market capitalization of US$54b, and pays its CEO total annual compensation worth US$13m. (This figure is for the year to December 2018). That’s less than last year. We think total compensation is more important but we note that the CEO salary is lower, at US$1.4m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.
That means Tom Fanning receives fairly typical remuneration for the CEO of a large company. 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 Southern, below.
Is The Southern Company Growing?
Over the last three years The Southern Company has shrunk its earnings per share by an average of 16% per year (measured with a line of best fit). Its revenue is up 2.0% over last year.
Unfortunately, earnings per share have trended lower over the last three years. The modest increase in revenue in the last year isn’t enough to make me overlook the disappointing change in earnings per share. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has The Southern Company Been A Good Investment?
The Southern Company has generated a total shareholder return of 20% over three years, so most shareholders would be reasonably content. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.
Tom Fanning is paid around the same as most CEOs of large companies.
We’re not seeing great strides in earnings per share, and total returns were decent but not amazing in the last three years. We do not think the CEO pay is a problem, but we’d venture the company should look to improve its business metrics (and share price) before paying any more. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Southern (free visualization of insider trades).
Important note: Southern 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 firstname.lastname@example.org. 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.