V. Watsa became the CEO of Fairfax Financial Holdings Limited (TSE:FFH) in 1985. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
How Does V. Watsa's Compensation Compare With Similar Sized Companies?
Our data indicates that Fairfax Financial Holdings Limited is worth CA$17b, and total annual CEO compensation is US$1.3m. (This is based on the year to December 2018). Notably, that's an increase of 111% over the year before. We think total compensation is more important but we note that the CEO salary is lower, at US$600k. We took a group of companies with market capitalizations over CA$11b, and calculated the median CEO total compensation to be CA$8.8m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
This would give shareholders a good impression of the company, since most large companies pay more, leaving less for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.
The graphic below shows how CEO compensation at Fairfax Financial Holdings has changed from year to year.
Is Fairfax Financial Holdings Limited Growing?
Fairfax Financial Holdings Limited has increased its earnings per share (EPS) by an average of 48% a year, over the last three years (using a line of best fit). Its revenue is up 6.1% over last year.
This demonstrates that the company has been improving recently. A good result. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. You might want to check this free visual report on analyst forecasts for future earnings.
Has Fairfax Financial Holdings Limited Been A Good Investment?
Fairfax Financial Holdings Limited has not done too badly by shareholders, with a total return of 0.1%, over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
It looks like Fairfax Financial Holdings Limited pays its CEO less than the average at large companies. Since the business is growing, many would argue this suggests the pay is modest. While some might be keen on seeing higher returns, our short analysis has not produced any evidence to suggest V. Watsa is overcompensated.
Few would complain about reasonable CEO remuneration when the business is growing earnings per share. It would be an additional positive if insiders are buying shares. So you may want to check if insiders are buying Fairfax Financial Holdings shares with their own money (free access).
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.
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.