Ken Frazier became the CEO of Merck & Co., Inc. (NYSE:MRK) in 2011. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we'll look at a snap shot of the business growth. 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.
How Does Ken Frazier's Compensation Compare With Similar Sized Companies?
According to our data, Merck & Co., Inc. has a market capitalization of US$212b, 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$1.6m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. 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. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
It would therefore appear that Merck & Co., Inc. pays Ken Frazier more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at Merck, below.
Is Merck & Co., Inc. Growing?
Merck & Co., Inc. has increased its earnings per share (EPS) by an average of 34% a year, over the last three years (using a line of best fit). It achieved revenue growth of 10% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. You might want to check this free visual report on analyst forecasts for future earnings.
Has Merck & Co., Inc. Been A Good Investment?
Boasting a total shareholder return of 43% over three years, Merck & Co., 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 compared the total CEO remuneration paid by Merck & Co., 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.
Importantly, though, the company has impressed with its earnings per share growth, 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. Shareholders may want to check for free if Merck insiders are buying or selling shares.
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.
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.
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. Thank you for reading.