Steve Sanghi became the CEO of Microchip Technology Incorporated (NASDAQ:MCHP) in 1991. First, this article will compare CEO compensation with compensation at 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 Steve Sanghi's Compensation Compare With Similar Sized Companies?
Our data indicates that Microchip Technology Incorporated is worth US$18b, and total annual CEO compensation was reported as US$13m for the year to March 2019. While we always look at total compensation first, we note that the salary component is less, at US$750k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$12m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Microchip Technology. Speaking on an industry level, we can see that nearly 16% of total compensation represents salary, while the remainder of 84% is other remuneration. It's interesting to note that Microchip Technology allocates a smaller portion of compensation to salary in comparison to the broader industry.
So Steve Sanghi is paid around the average of the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance. You can see, below, how CEO compensation at Microchip Technology has changed over time.
Is Microchip Technology Incorporated Growing?
Over the last three years Microchip Technology Incorporated has seen earnings per share (EPS) move in a positive direction by an average of 19% per year (using a line of best fit). It achieved revenue growth of 5.1% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. Shareholders might be interested in this free visualization of analyst forecasts.
Has Microchip Technology Incorporated Been A Good Investment?
Microchip Technology Incorporated has not done too badly by shareholders, with a total return of 7.1%, over three years. 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.
Steve Sanghi is paid around what is normal for the leaders of larger companies.
The company is growing EPS but shareholder returns have been sound but not amazing. So upon reflection one could argue that the CEO pay is quite reasonable. Taking a breather from CEO compensation, we've spotted 2 warning signs for Microchip Technology (of which 1 is concerning!) you should know about in order to have a holistic understanding of the stock.
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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