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David Abney became the CEO of United Parcel Service, Inc. (NYSE:UPS) in 2014. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does David Abney’s Compensation Compare With Similar Sized Companies?
At the time of writing our data says that United Parcel Service, Inc. has a market cap of US$93b, and is paying total annual CEO compensation of US$15m. (This figure is for the year to 2017). While we always look at total compensation first, we note that the salary component is less, at US$1.2m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO 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 David Abney receives more in total compensation than the median of a group of large companies in the same market as United Parcel Service, 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.
The graphic below shows how CEO compensation at United Parcel Service has changed from year to year.
Is United Parcel Service, Inc. Growing?
On average over the last three years, United Parcel Service, Inc. has grown earnings per share (EPS) by 4.5% each year (using a line of best fit). In the last year, its revenue is up 9.1%.
I’d prefer higher revenue growth, but it is good to see modest EPS growth. It’s clear the performance has been quite decent, but it it falls short of outstanding,based on this information. You might want to check this free visual report on analyst forecasts for future earnings.
Has United Parcel Service, Inc. Been A Good Investment?
United Parcel Service, Inc. has generated a total shareholder return of 22% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
We compared the total CEO remuneration paid by United Parcel Service, 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.
Over the last three years returns to investors have been uninspiring, and we would have liked to see stronger business growth. So it’s certainly hard to argue that the CEO is modestly paid, although we don’t see the remuneration as an issue. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling United Parcel Service (free visualization of insider trades).
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.