How Is Broadcom's (NASDAQ:AVGO) CEO Paid Relative To Peers?
This article will reflect on the compensation paid to Hock Tan who has served as CEO of Broadcom Inc. (NASDAQ:AVGO) since 2006. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
View our latest analysis for Broadcom
Comparing Broadcom Inc.'s CEO Compensation With the industry
According to our data, Broadcom Inc. has a market capitalization of US$194b, and paid its CEO total annual compensation worth US$3.7m over the year to November 2020. That's a notable increase of 56% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.2m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$9.4m. This suggests that Hock Tan is paid below the industry median. What's more, Hock Tan holds US$104m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$1.2m | US$1.1m | 32% |
Other | US$2.5m | US$1.3m | 68% |
Total Compensation | US$3.7m | US$2.4m | 100% |
Talking in terms of the industry, salary represented approximately 16% of total compensation out of all the companies we analyzed, while other remuneration made up 84% of the pie. It's interesting to note that Broadcom pays out a greater portion of remuneration through salary, compared to the industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Broadcom Inc.'s Growth Numbers
Broadcom Inc.'s earnings per share (EPS) grew 16% per year over the last three years. It achieved revenue growth of 5.7% over the last year.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Broadcom Inc. Been A Good Investment?
Most shareholders would probably be pleased with Broadcom Inc. for providing a total return of 111% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
To Conclude...
As previously discussed, Hock is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Considering robust EPS growth, we believe Hock to be modestly paid. Plus, we can't ignore the impressive shareholder returns, and won't be surprised if some shareholders were to reward such excellent all-around performance with a raise.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 4 warning signs for Broadcom (1 can't be ignored!) that you should be aware of before investing here.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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