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We have been pretty impressed with the performance at Eli Lilly and Company (NYSE:LLY) recently and CEO Dave Ricks deserves a mention for their role in it. The pleasing results would be something shareholders would keep in mind at the upcoming AGM on 03 May 2021. It is likely that the focus will be on company strategy going forward as shareholders hear from the board and cast their votes on resolutions such as executive remuneration and other matters. We think the CEO has done a pretty decent job and we discuss why the CEO compensation is appropriate.
How Does Total Compensation For Dave Ricks Compare With Other Companies In The Industry?
At the time of writing, our data shows that Eli Lilly and Company has a market capitalization of US$172b, and reported total annual CEO compensation of US$24m for the year to December 2020. That's a notable increase of 11% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.5m.
For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$20m. This suggests that Eli Lilly remunerates its CEO largely in line with the industry average. What's more, Dave Ricks holds US$87m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 29% of total compensation represents salary and 71% is other remuneration. Eli Lilly pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Eli Lilly and Company's Growth Numbers
Eli Lilly and Company has seen its earnings per share (EPS) increase by 72% a year over the past three years. Its revenue is up 9.9% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. 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 Eli Lilly and Company Been A Good Investment?
Boasting a total shareholder return of 143% over three years, Eli Lilly and Company has done well by shareholders. 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.
Seeing that the company has put in a relatively good performance, the CEO remuneration policy may not be the focus at the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.
CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 1 warning sign for Eli Lilly that investors should look into moving forward.
Important note: Eli Lilly is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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.
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