Kasper Rorsted became the CEO of adidas AG (ETR:ADS) in 2016, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether adidas pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
How Does Total Compensation For Kasper Rorsted Compare With Other Companies In The Industry?
Our data indicates that adidas AG has a market capitalization of €57b, and total annual CEO compensation was reported as €6.6m for the year to December 2019. That's mostly flat as compared to the prior year's compensation. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at €2.0m.
In comparison with other companies in the industry with market capitalizations over €6.6b , the reported median total CEO compensation was €5.4m. This suggests that adidas remunerates its CEO largely in line with the industry average.
Speaking on an industry level, nearly 68% of total compensation represents salary, while the remainder of 32% is other remuneration. In adidas' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at adidas AG's Growth Numbers
Over the last three years, adidas AG has shrunk its earnings per share by 29% per year. In the last year, its revenue is down 13%.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has adidas AG Been A Good Investment?
Most shareholders would probably be pleased with adidas AG for providing a total return of 81% 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.
As we touched on above, adidas AG is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. On the other hand, shareholder returns are showing positive trends over the same time frame. We do not think CEO compensation is a problem, but shareholders might think performance needs to be improved before paying any more.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 2 warning signs for adidas (of which 1 doesn't sit too well with us!) that you should know about in order to have a holistic understanding of the stock.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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