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We Discuss Why Cochlear Limited's (ASX:COH) CEO May Deserve A Higher Pay Packet

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·3-min read
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Shareholders will probably not be disappointed by the robust results at Cochlear Limited (ASX:COH) recently and they will be keeping this in mind as they go into the AGM on 18 October 2021. The focus will probably be on the future strategic initiatives that the board and management will put in place to improve the business rather than executive remuneration when they cast their votes on company resolutions. Here is our take on why we think CEO compensation is fair and may even warrant a raise.

View our latest analysis for Cochlear

How Does Total Compensation For Dig Howitt Compare With Other Companies In The Industry?

According to our data, Cochlear Limited has a market capitalization of AU$14b, and paid its CEO total annual compensation worth AU$4.9m over the year to June 2021. That's a notable increase of 80% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$1.8m.

For comparison, other companies in the industry with market capitalizations above AU$11b, reported a median total CEO compensation of AU$10m. Accordingly, Cochlear pays its CEO under the industry median. What's more, Dig Howitt holds AU$10m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component

2021

2020

Proportion (2021)

Salary

AU$1.8m

AU$1.7m

38%

Other

AU$3.0m

AU$977k

62%

Total Compensation

AU$4.9m

AU$2.7m

100%

Speaking on an industry level, nearly 61% of total compensation represents salary, while the remainder of 39% is other remuneration. In Cochlear's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

A Look at Cochlear Limited's Growth Numbers

Cochlear Limited has seen its earnings per share (EPS) increase by 5.1% a year over the past three years. Its revenue is up 13% over the last year.

We would argue that the modest growth in revenue is a notable positive. And the improvement in EPSis modest but respectable. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Cochlear Limited Been A Good Investment?

Cochlear Limited has served shareholders reasonably well, with a total return of 15% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

In Summary...

The company's overall performance, while not bad, could be better. If it continues on the same road, shareholders might feel even more confident about their investment, and have little to no objections concerning CEO pay. Instead, investors might be more interested in discussions that would help manage their longer-term growth expectations such as company business strategies and future growth potential.

Shareholders may want to check for free if Cochlear insiders are buying or selling shares.

Switching gears from Cochlear, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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