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Is Arrow Electronics, Inc.'s (NYSE:ARW) CEO Pay Fair?

Simply Wall St

Mike Long has been the CEO of Arrow Electronics, Inc. (NYSE:ARW) since 2009. First, this article will compare CEO compensation with compensation at similar sized companies. Next, we'll consider growth that the business demonstrates. 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.

See our latest analysis for Arrow Electronics

How Does Mike Long's Compensation Compare With Similar Sized Companies?

According to our data, Arrow Electronics, Inc. has a market capitalization of US$6.3b, and paid its CEO total annual compensation worth US$15m over the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.2m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$4.0b to US$12b. The median total CEO compensation was US$6.8m.

It would therefore appear that Arrow Electronics, Inc. pays Mike Long more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. 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 Arrow Electronics has changed from year to year.

NYSE:ARW CEO Compensation, October 20th 2019
NYSE:ARW CEO Compensation, October 20th 2019

Is Arrow Electronics, Inc. Growing?

Over the last three years Arrow Electronics, Inc. has shrunk its earnings per share by an average of 4.0% per year (measured with a line of best fit). In the last year, its revenue is up 4.4%.

Sadly for shareholders, earnings per share are actually down, over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has Arrow Electronics, Inc. Been A Good Investment?

With a total shareholder return of 23% over three years, Arrow Electronics, Inc. shareholders would, in general, 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 Arrow Electronics, Inc. with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.

We think many shareholders would be underwhelmed with the business growth over the last three years. And shareholder returns are decent but not great. So we doubt many shareholders would consider the CEO pay to be particularly modest! So you may want to check if insiders are buying Arrow Electronics 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.