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What Can We Learn About Costco Wholesale's (NASDAQ:COST) CEO Compensation?

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Simply Wall St
·3 min read
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This article will reflect on the compensation paid to W. Jelinek who has served as CEO of Costco Wholesale Corporation (NASDAQ:COST) since 2012. This analysis will also assess whether Costco Wholesale pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Costco Wholesale

Comparing Costco Wholesale Corporation's CEO Compensation With the industry

According to our data, Costco Wholesale Corporation has a market capitalization of US$160b, and paid its CEO total annual compensation worth US$8.3m over the year to August 2020. That's a modest increase of 3.3% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.0m.

For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$21m. Accordingly, Costco Wholesale pays its CEO under the industry median. Moreover, W. Jelinek also holds US$120m worth of Costco Wholesale stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2020

2019

Proportion (2020)

Salary

US$1.0m

US$934k

12%

Other

US$7.3m

US$7.1m

88%

Total Compensation

US$8.3m

US$8.0m

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. Costco Wholesale 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

Costco Wholesale Corporation's Growth

Costco Wholesale Corporation's earnings per share (EPS) grew 16% per year over the last three years. Its revenue is up 12% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. 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 Costco Wholesale Corporation Been A Good Investment?

We think that the total shareholder return of 96%, over three years, would leave most Costco Wholesale Corporation shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

As previously discussed, W. is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Considering robust EPS growth, we believe W. to be modestly paid. Given the strong history of shareholder returns, the shareholders are probably very happy with W.'s performance.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for Costco Wholesale that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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.