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Is Nasdaq, Inc.'s (NASDAQ:NDAQ) CEO Pay Fair?

Simply Wall St

Adena Friedman has been the CEO of Nasdaq, Inc. (NASDAQ:NDAQ) since 2017. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Next, we'll consider growth that the business demonstrates. 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.

Check out our latest analysis for Nasdaq

How Does Adena Friedman's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Nasdaq, Inc. has a market cap of US$18b, and reported total annual CEO compensation of US$14m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$1.0m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$11m. (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).

As you can see, Adena Friedman is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Nasdaq, Inc. is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at Nasdaq has changed over time.

NasdaqGS:NDAQ CEO Compensation, January 20th 2020

Is Nasdaq, Inc. Growing?

Over the last three years Nasdaq, Inc. has grown its earnings per share (EPS) by an average of 26% per year (using a line of best fit). It achieved revenue growth of 4.2% 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 Nasdaq, Inc. Been A Good Investment?

Boasting a total shareholder return of 72% over three years, Nasdaq, 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.

In Summary...

We examined the amount Nasdaq, Inc. 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 we must not forget that the EPS growth has been very strong over three years. In addition, shareholders have done well over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. Whatever your view on compensation, you might want to check if insiders are buying or selling Nasdaq shares (free trial).

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.