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Tom Fanning has been the CEO of The Southern Company ( NYSE:SO ) since 2010. First, this article will compare CEO compensation with compensation at other large companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Tom Fanning's Compensation Compare With Similar Sized Companies?
Our data indicates that The Southern Company is worth US$58b, and total annual CEO compensation is US$13m. (This figure is for the year to December 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.4m. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
So Tom Fanning receives a similar amount to the median CEO pay, amongst the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.
You can see, below, how CEO compensation at Southern has changed over time.
Is The Southern Company Growing?
The Southern Company has reduced its earnings per share by an average of 2.7% a year, over the last three years (measured with a line of best fit). It saw its revenue drop -4.6% over the last year.
Unfortunately there is a complete lack of earnings per share improvement, over three years. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.
Has The Southern Company Been A Good Investment?
With a total shareholder return of 20% over three years, The Southern Company shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
Tom Fanning is paid around the same as most CEOs of large companies.
We're not seeing great strides in earnings per share, and total returns were decent but not amazing in the last three years. We're not saying the CEO pay is too generous, but one might argue that the company should improve returns to shareholders before increasing it. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Southern.
Important note: Southern may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE 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 email@example.com . 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.