A Quick Analysis On Genuine Parts' (NYSE:GPC) CEO Compensation

This article will reflect on the compensation paid to Paul Donahue who has served as CEO of Genuine Parts Company (NYSE:GPC) since 2016. This analysis will also assess whether Genuine Parts pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Genuine Parts

How Does Total Compensation For Paul Donahue Compare With Other Companies In The Industry?

At the time of writing, our data shows that Genuine Parts Company has a market capitalization of US$13b, and reported total annual CEO compensation of US$8.2m for the year to December 2019. We note that's an increase of 54% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.2m.

In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$6.4m. From this we gather that Paul Donahue is paid around the median for CEOs in the industry. Furthermore, Paul Donahue directly owns US$7.5m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 45% of total compensation out of all the companies we analyzed, while other remuneration made up 55% of the pie. Genuine Parts sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Genuine Parts Company's Growth

Genuine Parts Company has reduced its earnings per share by 67% a year over the last three years. It achieved revenue growth of 3.0% over the last year.

Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. 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 Genuine Parts Company Been A Good Investment?

Genuine Parts Company has served shareholders reasonably well, with a total return of 24% 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...

As previously discussed, Paul is compensated close to the median for companies of its size, and which belong to the same industry. Genuine Parts has had a tough time in recent years, with declining EPS growth, and although shareholder returns are stable, they are hardly worth celebrating. This doesn't compare well with CEO compensation, which is largely in line with the industry median. Considering all of this, we can't say the CEO is underpaid, and moving forward shareholders will likely want to see higher growth to justify any raise.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 4 warning signs for Genuine Parts that investors should be aware of in a dynamic business environment.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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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