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Here's Why Shareholders May Want To Be Cautious With Increasing AbbVie Inc.'s (NYSE:ABBV) CEO Pay Packet

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CEO Rick Gonzalez has done a decent job of delivering relatively good performance at AbbVie Inc. (NYSE:ABBV) recently. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 07 May 2021. However, some shareholders may still want to keep CEO compensation within reason.

View our latest analysis for AbbVie

Comparing AbbVie Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that AbbVie Inc. has a market capitalization of US$196b, 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$1.7m.

For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$16m. Accordingly, our analysis reveals that AbbVie Inc. pays Rick Gonzalez north of the industry median. What's more, Rick Gonzalez holds US$64m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component

2020

2019

Proportion (2020)

Salary

US$1.7m

US$1.7m

7%

Other

US$22m

US$20m

93%

Total Compensation

US$24m

US$22m

100%

On an industry level, around 23% of total compensation represents salary and 77% is other remuneration. AbbVie sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

A Look at AbbVie Inc.'s Growth Numbers

AbbVie Inc. has reduced its earnings per share by 6.2% a year over the last three years. Its revenue is up 38% over the last year.

Investors would be a bit wary of companies that have lower EPS On the other hand, the strong revenue growth suggests the business is growing. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. 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 AbbVie Inc. Been A Good Investment?

With a total shareholder return of 29% over three years, AbbVie Inc. shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

To Conclude...

The overall company performance has been commendable, however there are still areas for improvement. We still think that some shareholders will be hesitant of increasing CEO pay until EPS growth improves, since they are already paid higher than the industry.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 5 warning signs for AbbVie that you should be aware of before investing.

Important note: AbbVie 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.