In 2011 Tim Cook was appointed CEO of Apple Inc. (NASDAQ:AAPL). This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
How Does Tim Cook’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Apple Inc. has a market cap of US$1.3t, and reported total annual CEO compensation of US$16m for the year to September 2018. While we always look at total compensation first, we note that the salary component is less, at US$3.0m. 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 US$8.0b, and calculated the median CEO total compensation to be US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.
As you can see, Tim Cook is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Apple Inc. is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see a visual representation of the CEO compensation at Apple, below.
Is Apple Inc. Growing?
On average over the last three years, Apple Inc. has grown earnings per share (EPS) by 15% each year (using a line of best fit). Its revenue is down 2.0% over last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. While it would be good to see revenue growth, profits matter more in the end. Shareholders might be interested in this free visualization of analyst forecasts.
Has Apple Inc. Been A Good Investment?
Most shareholders would probably be pleased with Apple Inc. for providing a total return of 165% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared the total CEO remuneration paid by Apple Inc., and compared it to remuneration at a group of other large companies. We found that it pays well over the median amount paid in the benchmark group.
However, the earnings per share growth over three years is certainly impressive. In addition, shareholders have done well over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. Whatever your view on compensation, you might want to check if insiders are buying or selling Apple shares (free trial).
Important note: Apple 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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