U.S. Markets open in 4 hrs 16 mins

Is Archer-Daniels-Midland Company's (NYSE:ADM) CEO Overpaid Relative To Its Peers?

Simply Wall St

In 2015 Juan Luciano was appointed CEO of Archer-Daniels-Midland Company (NYSE:ADM). 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 method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Archer-Daniels-Midland

How Does Juan Luciano's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Archer-Daniels-Midland Company has a market cap of US$24b, and reported total annual CEO compensation of US$20m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.3m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. 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.

As you can see, Juan Luciano is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Archer-Daniels-Midland Company is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

The graphic below shows how CEO compensation at Archer-Daniels-Midland has changed from year to year.

NYSE:ADM CEO Compensation, November 10th 2019

Is Archer-Daniels-Midland Company Growing?

On average over the last three years, Archer-Daniels-Midland Company has grown earnings per share (EPS) by 5.3% each year (using a line of best fit). In the last year, its revenue changed by just 0.3%.

I generally like to see a little revenue growth, but I'm happy with the EPS growth. It's hard to reach a conclusion about business performance right now. This may be one to watch. It could be important to check this free visual depiction of what analysts expect for the future.

Has Archer-Daniels-Midland Company Been A Good Investment?

Archer-Daniels-Midland Company has generated a total shareholder return of 14% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

We compared total CEO remuneration at Archer-Daniels-Midland Company with the amount paid at other large companies. As discussed above, we discovered that the company pays more than the median of that group.

We generally prefer to see stronger EPS growth, and we're not particularly impressed with the total shareholder return, over the last three years. Considering this, we wouldn't want to see any big pay rises, although we'd stop short of calling the CEO compensation unfair. Whatever your view on compensation, you might want to check if insiders are buying or selling Archer-Daniels-Midland shares (free trial).

Important note: Archer-Daniels-Midland 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 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.