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In 2013 Tom Leighton was appointed CEO of Akamai Technologies, Inc. (NASDAQ:AKAM). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big 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 Tom Leighton’s Compensation Compare With Similar Sized Companies?
Our data indicates that Akamai Technologies, Inc. is worth US$11b, and total annual CEO compensation is US$9.2m. (This figure is for the year to December 2017). We think total compensation is more important but we note that the CEO salary is lower, at US$1.0. 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. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.
That means Tom Leighton receives fairly typical remuneration for the CEO of a large company. Although this fact alone doesn’t tell us a great deal, it becomes more relevant when considered against the business performance.
The graphic below shows how CEO compensation at Akamai Technologies has changed from year to year.
Is Akamai Technologies, Inc. Growing?
Over the last three years Akamai Technologies, Inc. has shrunk its earnings per share by an average of 12% per year (measured with a line of best fit). In the last year, its revenue is up 9.1%.
Unfortunately, earnings per share have trended lower over the last three years. And the modest revenue growth over 12 months isn’t much comfort against the reduced earnings per share. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.
Has Akamai Technologies, Inc. Been A Good Investment?
With a total shareholder return of 26% over three years, Akamai Technologies, Inc. shareholders would, in general, be reasonably content. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.
Tom Leighton is paid around the same as most CEOs of large companies.
We feel that earnings per share have been a bit disappointing, but and we don’t think the total returns are amazing. We do not think the CEO pay is a problem, but it’s probably fair to say that many shareholders would like to see improved performance, before any pay rise occurs. So you may want to check if insiders are buying Akamai Technologies shares with their own money (free access).
Important note: Akamai Technologies 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 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. Thank you for reading.