Here's What We Think About InterDigital's (NASDAQ:IDCC) CEO Pay
William Merritt became the CEO of InterDigital, Inc. (NASDAQ:IDCC) in 2005, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
See our latest analysis for InterDigital
How Does Total Compensation For William Merritt Compare With Other Companies In The Industry?
According to our data, InterDigital, Inc. has a market capitalization of US$1.7b, and paid its CEO total annual compensation worth US$3.4m over the year to December 2019. That's a notable increase of 14% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$681k.
On examining similar-sized companies in the industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$2.8m. From this we gather that William Merritt is paid around the median for CEOs in the industry. Furthermore, William Merritt directly owns US$11m worth of shares in the company, implying that they are deeply invested in the company's success.
Component | 2019 | 2018 | Proportion (2019) |
Salary | US$681k | US$640k | 20% |
Other | US$2.7m | US$2.4m | 80% |
Total Compensation | US$3.4m | US$3.0m | 100% |
On an industry level, around 24% of total compensation represents salary and 76% is other remuneration. InterDigital 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 InterDigital, Inc.'s Growth Numbers
Over the last three years, InterDigital, Inc. has shrunk its earnings per share by 49% per year. Its revenue is up 21% over the last year.
The decrease in EPS could be a concern for some investors. But on the other hand, revenue growth is strong, suggesting a brighter future. It's hard to reach a conclusion about business performance right now. This may be one to watch. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has InterDigital, Inc. Been A Good Investment?
With a three year total loss of 19% for the shareholders, InterDigital, Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
In Summary...
As we touched on above, InterDigital, Inc. is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But revenue growth seems to be inching northward, a heartening sign for the company. Contrarily, shareholder returns are in the red over the same stretch. EPS growth is bleak as well, adding fuel to the fire. We'd say CEO compensation isn't unfair, but shareholders may be wary of a bump in pay before the company substantially improves overall performance.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for InterDigital (of which 1 is concerning!) that you should know about in order to have a holistic understanding of the stock.
Important note: InterDigital 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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