Hock Tan became the CEO of Broadcom Inc. (NASDAQ:AVGO) in 2006. This analysis aims first to contrast CEO compensation with other large 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. This process should give us an idea about how appropriately the CEO is paid.
How Does Hock Tan's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Broadcom Inc. has a market cap of US$129b, and reported total annual CEO compensation of US$5.0m for the year to November 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.1m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over US$8.0b, we found that their 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.
Most shareholders would consider it a positive that Hock Tan takes less in total compensation than the CEOs of most other large companies, leaving more for shareholders. Though positive, it's important we delve into the performance of the actual business.
You can see, below, how CEO compensation at Broadcom has changed over time.
Is Broadcom Inc. Growing?
Over the last three years Broadcom Inc. has grown its earnings per share (EPS) by an average of 49% per year (using a line of best fit). Its revenue is up 8.4% over last year.
This demonstrates that the company has been improving recently. A good result. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. It could be important to check this free visual depiction of what analysts expect for the future.
Has Broadcom Inc. Been A Good Investment?
Most shareholders would probably be pleased with Broadcom Inc. for providing a total return of 72% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
Broadcom Inc. is currently paying its CEO below what is normal for large companies.
Considering the underlying business is growing earnings, this would suggest the pay is modest. The pleasing shareholder returns are the cherry on top; you might even consider that Hock Tan deserves a raise! It is relatively rare to see a modestly paid CEO when performance is so impressive. The cherry on top would be if company insiders are buying shares with their own money. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Broadcom (free visualization of insider trades).
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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