Ginni Rometty became the CEO of International Business Machines Corporation (NYSE:IBM) in 2012. This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Ginni Rometty's Compensation Compare With Similar Sized Companies?
According to our data, International Business Machines Corporation has a market capitalization of US$125b, and pays its CEO total annual compensation worth US$18m. (This figure is for the year to December 2018). That's actually a decrease on the year before. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.6m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
Thus we can conclude that Ginni Rometty receives more in total compensation than the median of a group of large companies in the same market as International Business Machines Corporation. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
You can see, below, how CEO compensation at International Business Machines has changed over time.
Is International Business Machines Corporation Growing?
Over the last three years International Business Machines Corporation has shrunk its earnings per share by an average of 21% per year (measured with a line of best fit). Its revenue is down -1.7% over last year.
Few shareholders would be pleased to read that earnings per share are lower over three years. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. You might want to check this free visual report on analyst forecasts for future earnings.
Has International Business Machines Corporation Been A Good Investment?
With a total shareholder return of 6.7% over three years, International Business Machines Corporation has done okay by shareholders. But they would probably prefer not to see CEO compensation far in excess of the median.
We examined the amount International Business Machines Corporation pays its CEO, and compared it to the amount paid by other large companies. We found that it pays well over the median amount paid in the benchmark group.
Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.
And while shareholder returns have been respectable, they have hardly been superb. So you may want to delve deeper, because we don't think the CEO pay is too low. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling International Business Machines (free visualization of insider trades).
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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