E. Santi became the CEO of Illinois Tool Works Inc. (NYSE:ITW) in 2012. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Next, we’ll consider growth that the business demonstrates. 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.
How Does E. Santi’s Compensation Compare With Similar Sized Companies?
According to our data, Illinois Tool Works Inc. has a market capitalization of US$43b, and pays its CEO total annual compensation worth US$17m. (This number is for the twelve months until 2017). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$1.3m. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO compensation was US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).
As you can see, E. Santi is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Illinois Tool Works Inc. is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at Illinois Tool Works has changed from year to year.
Is Illinois Tool Works Inc. Growing?
Over the last three years Illinois Tool Works Inc. has grown its earnings per share (EPS) by an average of 2.3% per year. In the last year, its revenue is up 5.2%.
I’d prefer higher revenue growth, but it is good to see modest EPS growth. So there are some positives here, but not enough to earn high praise.
Shareholders might be interested in this free visualization of analyst forecasts. .
Has Illinois Tool Works Inc. Been A Good Investment?
Most shareholders would probably be pleased with Illinois Tool Works Inc. for providing a total return of 54% over three years. This strong performance might mean some shareholders don’t mind if the CEO is paid more than is normal for a company of its size.
We compared total CEO remuneration at Illinois Tool Works Inc. with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.
While we generally prefer to see stronger EPS growth, there’s no arguing with the strong returns to shareholders, over the last three years. So, considering these tasty returns, the CEO compensation may be quite appropriate. Whatever your view on compensation, you might want to check if insiders are buying or selling Illinois Tool Works shares (free trial).
Or you might prefer gaze upon this detailed graph of past earnings, revenue and cash flow .
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.