Miles White has been the CEO of Abbott Laboratories (NYSE:ABT) since 1999. First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Miles White's Compensation Compare With Similar Sized Companies?
According to our data, Abbott Laboratories has a market capitalization of US$149b, and pays its CEO total annual compensation worth US$24m. (This figure is for the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$1.9m. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Thus we can conclude that Miles White receives more in total compensation than the median of a group of large companies in the same market as Abbott Laboratories. However, this doesn't necessarily mean the pay is too high. 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 Abbott Laboratories has changed from year to year.
Is Abbott Laboratories Growing?
On average over the last three years, Abbott Laboratories has grown earnings per share (EPS) by 14% each year (using a line of best fit). It achieved revenue growth of 4.6% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Shareholders might be interested in this free visualization of analyst forecasts.
Has Abbott Laboratories Been A Good Investment?
Boasting a total shareholder return of 112% over three years, Abbott Laboratories has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
We examined the amount Abbott Laboratories pays its CEO, and compared it to the amount paid by other large companies. As discussed above, we discovered that the company pays more than the median of that group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. On top of that, in the same period, returns to shareholders have been great. So, considering this good performance, the CEO compensation may be quite appropriate. Whatever your view on compensation, you might want to check if insiders are buying or selling Abbott Laboratories shares (free trial).
Important note: Abbott Laboratories 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.
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