Rick Gonzalez has been the CEO of AbbVie Inc. (NYSE:ABBV) since 2012. First, this article will compare CEO compensation with compensation at other large companies. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Rick Gonzalez's Compensation Compare With Similar Sized Companies?
According to our data, AbbVie Inc. has a market capitalization of US$121b, and paid its CEO total annual compensation worth US$21m over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$1.7m. 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. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Thus we can conclude that Rick Gonzalez receives more in total compensation than the median of a group of large companies in the same market as AbbVie Inc.. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at AbbVie has changed from year to year.
Is AbbVie Inc. Growing?
On average over the last three years, AbbVie Inc. has shrunk earnings per share by 8.6% each year (measured with a line of best fit). It achieved revenue growth of 2.1% over the last year.
Sadly for shareholders, earnings per share are actually down, over three years. The modest increase in revenue in the last year isn't enough to make me overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has AbbVie Inc. Been A Good Investment?
Boasting a total shareholder return of 49% over three years, AbbVie 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.
We examined the amount AbbVie 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.
We think many shareholders would be underwhelmed with the business growth over the last three years. But clearly there are some positives, because investors have done well over the same time frame. So on this analysis we'd stop short of criticizing the level of CEO compensation. Shareholders may want to check for free if AbbVie insiders are buying or selling shares.
Important note: AbbVie 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.
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