In 2009, Todd McKinnon was appointed CEO of Okta, Inc. (NASDAQ:OKTA). 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 process should give us an idea about how appropriately the CEO is paid.
How Does Todd McKinnon's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Okta, Inc. has a market cap of US$21b, and reported total annual CEO compensation of US$9.0m for the year to January 2020. Notably, that's an increase of 79% over the year before. We think total compensation is more important but we note that the CEO salary is lower, at US$306k. 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. (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).
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Okta stands. Talking in terms of the sector, salary represented approximately 16% of total compensation out of all the companies we analysed, while other remuneration made up 84% of the pie. Interestingly, the company has chosen to go down an unconventional route in that it pays a smaller salary to Todd McKinnon as compared to non-salary compensation over the one-year period examined.
So Todd McKinnon 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. The graphic below shows how CEO compensation at Okta has changed from year to year.
Is Okta, Inc. Growing?
On average over the last three years, Okta, Inc. has seen earnings per share (EPS) move in a favourable direction by 33% each year (using a line of best fit). In the last year, its revenue is up 47%.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. You might want to check this free visual report on analyst forecasts for future earnings.
Has Okta, Inc. Been A Good Investment?
Most shareholders would probably be pleased with Okta, Inc. for providing a total return of 613% 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.
Todd McKinnon is paid around what is normal for the leaders of larger companies.
Shareholders would surely be happy to see that shareholder returns have been great, and the earnings per share are up. Indeed, many might consider the pay rather modest, given the solid company performance! On another note, Okta has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
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 email@example.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.
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