In 2010, Ajay Banga was appointed CEO of Mastercard Incorporated (NYSE:MA). This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Ajay Banga's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Mastercard Incorporated has a market cap of US$296b, and reported total annual CEO compensation of US$23m for the year to December 2019. Notably, that's an increase of 14% over the year before. While we always look at total compensation first, we note that the salary component is less, at US$1.3m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$12m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Mastercard. On a sector level, around 16% of total compensation represents salary and 84% is other remuneration. It's interesting to note that Mastercard allocates a smaller portion of compensation to salary in comparison to the broader industry.
It would therefore appear that Mastercard Incorporated pays Ajay Banga more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. You can see, below, how CEO compensation at Mastercard has changed over time.
Is Mastercard Incorporated Growing?
Mastercard Incorporated has seen earnings per share (EPS) move positively by an average of 27% a year, over the last three years (using a line of best fit). Its revenue is up 11% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's a real positive to see this sort of growth in a single year. That suggests a healthy and growing business. It could be important to check this free visual depiction of what analysts expect for the future.
Has Mastercard Incorporated Been A Good Investment?
Most shareholders would probably be pleased with Mastercard Incorporated for providing a total return of 147% over three years. 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.
We examined the amount Mastercard Incorporated 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.
However, the earnings per share growth over three years is certainly impressive. In addition, shareholders have done well over the same time period. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. Moving away from CEO compensation for the moment, we've identified 3 warning signs for Mastercard that you should be aware of before investing.
Important note: Mastercard may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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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. Thank you for reading.