Jim Umpleby has been the CEO of Caterpillar Inc. (NYSE:CAT) since 2017. First, this article will compare CEO compensation with compensation at 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. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Jim Umpleby's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Caterpillar Inc. has a market cap of US$72b, and is paying total annual CEO compensation of US$27m. (This is based on the year to December 2018). While we always look at total compensation first, we note that the salary component is less, at US$1.4m. When we examined a group of companies with market caps over US$8.0b, we found that their 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).
Thus we can conclude that Jim Umpleby receives more in total compensation than the median of a group of large companies in the same market as Caterpillar Inc.. However, this doesn't necessarily mean the pay is too high. 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 Caterpillar has changed over time.
Is Caterpillar Inc. Growing?
Over the last three years Caterpillar Inc. has grown its earnings per share (EPS) by an average of 90% per year (using a line of best fit). In the last year, its revenue is up 8.9%.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. It could be important to check this free visual depiction of what analysts expect for the future.
Has Caterpillar Inc. Been A Good Investment?
I think that the total shareholder return of 68%, over three years, would leave most Caterpillar Inc. shareholders smiling. 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 compared the total CEO remuneration paid by Caterpillar Inc., and compared it to remuneration at a group of other large companies. Our data suggests that it pays above the median CEO pay within that group.
However, the earnings per share growth over three years is certainly impressive. Even better, returns to shareholders have been plentiful, over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Caterpillar.
If you want to buy a stock that is better than Caterpillar, this free list of high return, low debt companies is a great place to look.
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