Kevin Lobo has been the CEO of Stryker Corporation (NYSE:SYK) since 2012, and this article will examine the executive’s compensation with respect to the overall performance of the company. This analysis will also assess whether Stryker pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
See our latest analysis for Stryker
Comparing Stryker Corporation’s CEO Compensation With the industry
Our data indicates that Stryker Corporation has a market capitalization of US$76b, and total annual CEO compensation was reported as US$15m for the year to December 2019. That’s a modest increase of 7.6% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.2m.
In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$11m. Hence, we can conclude that Kevin Lobo is remunerated higher than the industry median. Moreover, Kevin Lobo also holds US$14m worth of Stryker stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2019 | 2018 | Proportion (2019) |
| Salary | US$1.2m | US$1.2m | 8% |
| Other | US$14m | US$13m | 92% |
| Total Compensation | US$15m | US$14m | 100% |
On an industry level, roughly 21% of total compensation represents salary and 79% is other remuneration. Stryker sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Stryker Corporation’s Growth
Over the past three years, Stryker Corporation has seen its earnings per share (EPS) grow by 8.6% per year. In the last year, its revenue is up 7.8%.
We’d prefer higher revenue growth, but the modest improvement in EPS is good. Considering these factors we’d say performance has been pretty decent, though not amazing. Historical performance can sometimes be a good indicator on what’s coming up next but if you want to peer into the company’s future you might be interested in this free visualization of analyst forecasts.
Has Stryker Corporation Been A Good Investment?
Boasting a total shareholder return of 42% over three years, Stryker Corporation 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.
In Summary…
As previously discussed, Kevin is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Importantly though, shareholder returns for the last three years have been excellent. That’s why we were hoping earnings growth would match this growth, but sadly that is not the case. We’d ideally want to see higher earnings growth, but CEO compensation seems to be within reason, given high shareholder returns.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That’s why we did some digging and identified 3 warning signs for Stryker that investors should think about before committing capital to this stock.
Important note: Stryker is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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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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