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In 2012 E. Santi was appointed CEO of Illinois Tool Works Inc. (NYSE:ITW). This analysis aims first to contrast CEO compensation with other large companies. Next, we’ll consider growth that the business demonstrates. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
How Does E. Santi’s Compensation Compare With Similar Sized Companies?
According to our data, Illinois Tool Works Inc. has a market capitalization of US$46b, and pays its CEO total annual compensation worth US$17m. (This number is for the twelve months until 2017). We think total compensation is more important but we note that the CEO salary is lower, at US$1.3m. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO compensation was US$11m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
As you can see, E. Santi is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Illinois Tool Works Inc. is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see a visual representation of the CEO compensation at Illinois Tool Works, below.
Is Illinois Tool Works Inc. Growing?
On average over the last three years, Illinois Tool Works Inc. has grown earnings per share (EPS) by 5.8% each year (using a line of best fit). It achieved revenue growth of 3.2% over the last year.
I’d prefer higher revenue growth, but I’m happy with the modest EPS growth. Considering these factors I’d say performance has been pretty decent, though not amazing. You might want to check this free visual report on analyst forecasts for future earnings.
Has Illinois Tool Works Inc. Been A Good Investment?
I think that the total shareholder return of 63%, over three years, would leave most Illinois Tool Works Inc. shareholders smiling. 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 compared total CEO remuneration at Illinois Tool Works Inc. with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.
While we generally prefer to see stronger EPS growth, there’s no arguing with the strong returns to shareholders, over the last three years. Considering this fine result for investors, we daresay the CEO compensation might be apt. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Illinois Tool Works (free visualization of insider trades).
Important note: Illinois Tool Works 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.