We Think Some Shareholders May Hesitate To Increase Illinois Tool Works Inc.'s (NYSE:ITW) CEO Compensation
Performance at Illinois Tool Works Inc. (NYSE:ITW) has been reasonably good and CEO E. Santi has done a decent job of steering the company in the right direction. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 07 May 2021. However, some shareholders will still be cautious of paying the CEO excessively.
View our latest analysis for Illinois Tool Works
How Does Total Compensation For E. Santi Compare With Other Companies In The Industry?
According to our data, Illinois Tool Works Inc. has a market capitalization of US$73b, and paid its CEO total annual compensation worth US$14m over the year to December 2020. That's a notable decrease of 9.3% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.3m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$8.8m. Hence, we can conclude that E. Santi is remunerated higher than the industry median. Furthermore, E. Santi directly owns US$48m worth of shares in the company, implying that they are deeply invested in the company's success.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$1.3m | US$1.3m | 10% |
Other | US$13m | US$14m | 90% |
Total Compensation | US$14m | US$15m | 100% |
Speaking on an industry level, nearly 19% of total compensation represents salary, while the remainder of 81% is other remuneration. In Illinois Tool Works' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Illinois Tool Works Inc.'s Growth Numbers
Illinois Tool Works Inc. has seen its earnings per share (EPS) increase by 8.1% a year over the past three years. Its revenue is down 11% over the previous year.
We would prefer it if there was revenue growth, but it is good to see a modest EPS growth at least. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Illinois Tool Works Inc. Been A Good Investment?
We think that the total shareholder return of 71%, over three years, would leave most Illinois Tool Works Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
To Conclude...
Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, any decision to raise CEO pay might be met with some objections from the shareholders given that the CEO is already paid higher than the industry average.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Illinois Tool Works that you should be aware of before investing.
Switching gears from Illinois Tool Works, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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