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Tad Smith has been the CEO of Sotheby's (NYSE:BID) since 2015. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. 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 Tad Smith's Compensation Compare With Similar Sized Companies?
According to our data, Sotheby's has a market capitalization of US$1.6b, and pays its CEO total annual compensation worth US$7.4m. (This number is for the twelve months until December 2018). That's less than last year. While we always look at total compensation first, we note that the salary component is less, at US$1.4m. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$1.0b to US$3.2b. The median total CEO compensation was US$4.1m.
It would therefore appear that Sotheby's pays Tad Smith more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration 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 Sotheby's, below.
Is Sotheby's Growing?
Over the last three years Sotheby's has grown its earnings per share (EPS) by an average of 46% per year (using a line of best fit). Its revenue is down -3.8% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. You might want to check this free visual report on analyst forecasts for future earnings.
Has Sotheby's Been A Good Investment?
Sotheby's has generated a total shareholder return of 6.1% over three years, so most shareholders wouldn't be too disappointed. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
We compared total CEO remuneration at Sotheby's with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.
However we must not forget that the EPS growth has been very strong over three years. Looking at the same time period, we think that the shareholder returns are respectable. So, considering the EPS growth we do not wish to criticize the level of CEO compensation, though we'd recommend further research on management. Whatever your view on compensation, you might want to check if insiders are buying or selling Sotheby's shares (free trial).
If you want to buy a stock that is better than Sotheby's, this free list of high return, low debt companies is a great place to look.
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.