Yahoo Finance How Should Investors React To Baker Hughes' (NYSE:BKR) CEO Pay?
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Lorenzo Simonelli has been the CEO of Baker Hughes Company (NYSE:BKR) since 2017, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Baker Hughes pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Check out our latest analysis for Baker Hughes
Comparing Baker Hughes Company's CEO Compensation With the industry
At the time of writing, our data shows that Baker Hughes Company has a market capitalization of US$16b, and reported total annual CEO compensation of US$15m for the year to December 2019. That's a slight decrease of 6.5% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.4m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$15m. This suggests that Baker Hughes remunerates its CEO largely in line with the industry average. Furthermore, Lorenzo Simonelli directly owns US$2.7m worth of shares in the company.
Component | 2019 | 2018 | Proportion (2019) |
Salary | US$1.4m | US$1.4m | 10% |
Other | US$13m | US$15m | 90% |
Total Compensation | US$15m | US$16m | 100% |
On an industry level, around 21% of total compensation represents salary and 79% is other remuneration. In Baker Hughes' 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.
A Look at Baker Hughes Company's Growth Numbers
Over the last three years, Baker Hughes Company has shrunk its earnings per share by 133% per year. It achieved revenue growth of 2.4% over the last year.
Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Baker Hughes Company Been A Good Investment?
With a three year total loss of 56% for the shareholders, Baker Hughes Company would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be lessto generous with CEO compensation.
To Conclude...
As we noted earlier, Baker Hughes pays its CEO in line with similar-sized companies belonging to the same industry. Meanwhile, earnings growth and shareholder returns have been in the red for the last three years. We'd stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 2 warning signs for Baker Hughes you should be aware of, and 1 of them can't be ignored.
Switching gears from Baker Hughes, 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. 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.
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