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Here's Why Shareholders May Want To Be Cautious With Increasing Analog Devices, Inc.'s (NASDAQ:ADI) CEO Pay Packet

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CEO Vince Roche has done a decent job of delivering relatively good performance at Analog Devices, Inc. (NASDAQ:ADI) recently. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 10 March 2021. However, some shareholders may still want to keep CEO compensation within reason.

View our latest analysis for Analog Devices

Comparing Analog Devices, Inc.'s CEO Compensation With the industry

According to our data, Analog Devices, Inc. has a market capitalization of US$55b, and paid its CEO total annual compensation worth US$12m over the year to October 2020. That's a fairly small increase of 3.4% over the previous year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.1m.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$9.4m. Accordingly, our analysis reveals that Analog Devices, Inc. pays Vince Roche north of the industry median. Moreover, Vince Roche also holds US$2.5m worth of Analog Devices stock directly under their own name.

Component

2020

2019

Proportion (2020)

Salary

US$1.1m

US$1.0m

8%

Other

US$11m

US$11m

92%

Total Compensation

US$12m

US$12m

100%

Talking in terms of the industry, salary represented approximately 16% of total compensation out of all the companies we analyzed, while other remuneration made up 84% of the pie. Analog Devices sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
ceo-compensation

A Look at Analog Devices, Inc.'s Growth Numbers

Over the past three years, Analog Devices, Inc. has seen its earnings per share (EPS) grow by 20% per year. Its revenue is up 1.8% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. 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 Analog Devices, Inc. Been A Good Investment?

We think that the total shareholder return of 73%, over three years, would leave most Analog Devices, Inc. shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, any decision to raise CEO pay might be met with some objections from the shareholders given that the CEO is already paid higher than the industry average.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 2 warning signs for Analog Devices that investors should be aware of in a dynamic business environment.

Important note: Analog Devices 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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