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Is Adobe Inc.'s (NASDAQ:ADBE) CEO Pay Justified?

Simply Wall St

In 2007 Shantanu Narayen was appointed CEO of Adobe Inc. (NASDAQ:ADBE). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big 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.

See our latest analysis for Adobe

How Does Shantanu Narayen's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Adobe Inc. has a market cap of US$137b, and is paying total annual CEO compensation of US$28m. (This is based on the year to November 2018). While we always look at total compensation first, we note that the salary component is less, at US$1.0m. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

As you can see, Shantanu Narayen is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Adobe Inc. is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at Adobe has changed from year to year.

NasdaqGS:ADBE CEO Compensation, August 16th 2019

Is Adobe Inc. Growing?

Over the last three years Adobe Inc. has grown its earnings per share (EPS) by an average of 37% per year (using a line of best fit). In the last year, its revenue is up 24%.

This demonstrates that the company has been improving recently. A good result. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. It could be important to check this free visual depiction of what analysts expect for the future.

Has Adobe Inc. Been A Good Investment?

Boasting a total shareholder return of 181% over three years, Adobe Inc. has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We examined the amount Adobe Inc. pays its CEO, and compared it to the amount paid by other large companies. We found that it pays well over the median amount paid in the benchmark group.

However we must not forget that the EPS growth has been very strong over three years. Even better, returns to shareholders have been plentiful, over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. So you may want to check if insiders are buying Adobe 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 editorial-team@simplywallst.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.