In 1999 Miles White was appointed CEO of Abbott Laboratories (NYSE:ABT). This analysis aims first to contrast CEO compensation with 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. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Miles White’s Compensation Compare With Similar Sized Companies?
According to our data, Abbott Laboratories has a market capitalization of US$136b, and pays its CEO total annual compensation worth US$19m. (This figure is for the year to December 2017). We think total compensation is more important but we note that the CEO salary is lower, at US$1.9m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO compensation was US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.
It would therefore appear that Abbott Laboratories pays Miles White more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at Abbott Laboratories, below.
Is Abbott Laboratories Growing?
Over the last three years Abbott Laboratories has shrunk its earnings per share by an average of 33% per year (measured with a line of best fit). It achieved revenue growth of 12% over the last year.
Sadly for shareholders, earnings per share are actually down, over three years. While the revenue growth is good to see, it is outweighed by the fact that earnings per share are down, over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has Abbott Laboratories Been A Good Investment?
I think that the total shareholder return of 111%, over three years, would leave most Abbott Laboratories shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared the total CEO remuneration paid by Abbott Laboratories, and compared it to remuneration at a group of other large companies. We found that it pays well over the median amount paid in the benchmark group.
Earnings per share have not grown in three years, and the revenue growth fails to impress us.
However, we can’t argue with the strong returns to shareholders, over the same time period. Considering this, shareholders are probably not too worried about the CEO compensation. So you may want to check if insiders are buying Abbott Laboratories 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.
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