Is adidas AG's (ETR:ADS) CEO Being Overpaid?

Kasper Rorsted became the CEO of adidas AG (ETR:ADS) in 2016. This analysis aims first to contrast CEO compensation with other large 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 process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for adidas

How Does Kasper Rorsted's Compensation Compare With Similar Sized Companies?

Our data indicates that adidas AG is worth €53b, and total annual CEO compensation was reported as €6.8m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at €2.0m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We took a group of companies with market capitalizations over €7.2b, and calculated the median CEO total compensation to be €4.2m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.

It would therefore appear that adidas AG pays Kasper Rorsted 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 might want to check this free visual report on analyst forecasts for future earnings.

The graphic below shows how CEO compensation at adidas has changed from year to year.

Is adidas AG Growing?

On average over the last three years, adidas AG has grown earnings per share (EPS) by 21% each year (using a line of best fit). Its revenue is up 6.0% over 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 modest revenue growth, suggesting the underlying business is healthy.

Has adidas AG Been A Good Investment?

Most shareholders would probably be pleased with adidas AG for providing a total return of 102% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

We compared the total CEO remuneration paid by adidas AG, and compared it to remuneration at a group of other large companies. As discussed above, we discovered that the company pays more than the median of that group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. Even better, returns to shareholders have been plentiful, over the same time period. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling adidas (free visualization of insider trades).

Important note: adidas 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.

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 editorial-team@simplywallst.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.