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Chuck Robbins became the CEO of Cisco Systems, Inc. (NASDAQ:CSCO) in 2015. 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 we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Chuck Robbins's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Cisco Systems, Inc. has a market cap of US$234b, and is paying total annual CEO compensation of US$21m. (This figure is for the year to July 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$1.2m. We looked at a group of companies with market capitalizations over US$8.0b and the 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.
Thus we can conclude that Chuck Robbins receives more in total compensation than the median of a group of large companies in the same market as Cisco Systems, Inc.. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see a visual representation of the CEO compensation at Cisco Systems, below.
Is Cisco Systems, Inc. Growing?
Over the last three years Cisco Systems, Inc. has shrunk its earnings per share by an average of 16% per year (measured with a line of best fit). It achieved revenue growth of 5.6% over the last year.
Sadly for shareholders, earnings per share are actually down, over three years. The modest increase in revenue in the last year isn't enough to make me overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.
Has Cisco Systems, Inc. Been A Good Investment?
I think that the total shareholder return of 108%, over three years, would leave most Cisco Systems, Inc. shareholders smiling. 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.
We compared the total CEO remuneration paid by Cisco Systems, Inc., and compared it to remuneration at a group of other large companies. Our data suggests that it pays above the median CEO pay within that group.
Earnings per share have not grown in three years, and the revenue growth fails to impress us.
But clearly there are some positives, because investors have done well over the same time frame. So on this analysis we'd stop short of criticizing the level of CEO compensation. So you may want to check if insiders are buying Cisco Systems shares with their own money (free access).
Important note: Cisco Systems 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.