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What Does Broadcom's (NASDAQ:AVGO) CEO Pay Reveal?

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Hock Tan has been the CEO of Broadcom Inc. (NASDAQ:AVGO) since 2006, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Broadcom pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for Broadcom

Comparing Broadcom Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Broadcom Inc. has a market capitalization of US$131b, and reported total annual CEO compensation of US$2.4m for the year to November 2019. Notably, that's a decrease of 53% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.1m.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$11m. Accordingly, Broadcom pays its CEO under the industry median. Moreover, Hock Tan also holds US$80m worth of Broadcom stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2019

2018

Proportion (2019)

Salary

US$1.1m

US$1.1m

46%

Other

US$1.3m

US$3.9m

54%

Total Compensation

US$2.4m

US$5.0m

100%

Speaking on an industry level, nearly 14% of total compensation represents salary, while the remainder of 86% is other remuneration. Broadcom is paying a higher share of its remuneration through a salary in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

Broadcom Inc.'s Growth

Broadcom Inc. has reduced its earnings per share by 1.4% a year over the last three years. Its revenue is up 5.0% over the last year.

The lack of earnings growth is certainly unimpressive. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in earnings per share. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Broadcom Inc. Been A Good Investment?

We think that the total shareholder return of 45%, over three years, would leave most Broadcom Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar 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. And although the company is suffering from declining earnings growth over the past three years, shareholder returns remain strong. We would like to see EPS growth, but in our view CEO compensation is modest.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 4 warning signs for Broadcom you should be aware of, and 1 of them is concerning.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.