Tobi Lütke became the CEO of Shopify Inc. (NYSE:SHOP) in 2008. This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Tobi Lütke's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Shopify Inc. has a market cap of US$49b, and reported total annual CEO compensation of US$8.6m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$586k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. 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. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Shopify. Talking in terms of the sector, salary represented approximately 15% of total compensation out of all the companies we analysed, while other remuneration made up 85% of the pie. Readers will want to know that Shopify pays a modest slice of remuneration through salary, as compared to the wider sector.
So Tobi Lütke receives a similar amount to the median CEO pay, amongst the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. You can see a visual representation of the CEO compensation at Shopify, below.
Is Shopify Inc. Growing?
Over the last three years Shopify Inc. has shrunk its earnings per share by an average of 33% per year (measured with a line of best fit). It achieved revenue growth of 47% over the last year.
The reduction in earnings per share, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. These two metric are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. It could be important to check this free visual depiction of what analysts expect for the future.
Has Shopify Inc. Been A Good Investment?
Boasting a total shareholder return of 509% over three years, Shopify Inc. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
Tobi Lütke is paid around the same as most CEOs of large companies.
While the growth could be better, the shareholder returns are clearly good. So we can conclude that on this analysis the CEO compensation seems pretty sound. Moving away from CEO compensation for the moment, we've identified 2 warning signs for Shopify that you should be aware of before investing.
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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