How Should Investors React To GPT Group's (ASX:GPT) CEO Pay?

This article will reflect on the compensation paid to Bob Johnston who has served as CEO of GPT Group (ASX:GPT) since 2015. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for GPT Group

Comparing GPT Group's CEO Compensation With the industry

According to our data, GPT Group has a market capitalization of AU$7.9b, and paid its CEO total annual compensation worth AU$3.8m over the year to December 2019. That's a slight decrease of 3.6% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$1.4m.

For comparison, other companies in the same industry with market capitalizations ranging between AU$5.6b and AU$17b had a median total CEO compensation of AU$4.3m. From this we gather that Bob Johnston is paid around the median for CEOs in the industry. What's more, Bob Johnston holds AU$6.8m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 44% of total compensation out of all the companies we analyzed, while other remuneration made up 56% of the pie. GPT Group pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at GPT Group's Growth Numbers

GPT Group has reduced its earnings per share by 82% a year over the last three years. It saw its revenue drop 1.7% over the last year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet 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 GPT Group Been A Good Investment?

Since shareholders would have lost about 7.3% over three years, some GPT Group investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

As previously discussed, Bob is compensated close to the median for companies of its size, and which belong to the same industry. On the other hand, earnings growth and total shareholder return have been negative for the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 4 warning signs (and 1 which makes us a bit uncomfortable) in GPT Group we think you should know about.

Important note: GPT Group is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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