How Should Investors Feel About Baxter International's (NYSE:BAX) CEO Remuneration?
Joe Almeida became the CEO of Baxter International Inc. (NYSE:BAX) in 2016, 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 assess whether Baxter International pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Check out our latest analysis for Baxter International
How Does Total Compensation For Joe Almeida Compare With Other Companies In The Industry?
According to our data, Baxter International Inc. has a market capitalization of US$40b, and paid its CEO total annual compensation worth US$14m over the year to December 2019. We note that's a decrease of 11% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.3m.
In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$10m. Accordingly, our analysis reveals that Baxter International Inc. pays Joe Almeida north of the industry median. Furthermore, Joe Almeida 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$1.3m | US$1.3m | 9% |
Other | US$13m | US$14m | 91% |
Total Compensation | US$14m | US$16m | 100% |
Speaking on an industry level, nearly 21% of total compensation represents salary, while the remainder of 79% is other remuneration. It's interesting to note that Baxter International allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Baxter International Inc.'s Growth
Over the last three years, Baxter International Inc. has shrunk its earnings per share by 1.7% per year. Its revenue is up 3.3% over the last year.
Its a bit disappointing to see that the company has failed to grow its EPS. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Baxter International Inc. Been A Good Investment?
With a total shareholder return of 26% over three years, Baxter International Inc. shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
In Summary...
As previously discussed, Joe is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Unfortunately, EPS has not grown in three years, failing to impress us. And shareholder returns are decent but not great. So you can understand why we do not think CEO compensation is particularly modest!
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 3 warning signs for Baxter International that investors should be aware of in a dynamic business environment.
Important note: Baxter International 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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