Is Illinois Tool Works Inc. (NYSE:ITW) Excessively Paying Its CEO?

In 2012 E. Santi was appointed CEO of Illinois Tool Works Inc. (NYSE:ITW). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. After that, we will consider the growth in the business. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Illinois Tool Works

How Does E. Santi’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Illinois Tool Works Inc. has a market cap of US$50b, and is paying total annual CEO compensation of US$18m. (This is based on the year to December 2018). That’s a modest increase of 3.5% on the prior year year. We think total compensation is more important but we note that the CEO salary is lower, at US$1.3m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

It would therefore appear that Illinois Tool Works Inc. pays E. Santi 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 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 Illinois Tool Works, below.

NYSE:ITW CEO Compensation, April 12th 2019
NYSE:ITW CEO Compensation, April 12th 2019

Is Illinois Tool Works Inc. Growing?

On average over the last three years, Illinois Tool Works Inc. has grown earnings per share (EPS) by 5.8% each year (using a line of best fit). It achieved revenue growth of 3.2% over the last year.

I’m not particularly impressed by the 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?

Boasting a total shareholder return of 58% over three years, Illinois Tool Works Inc. has done well by shareholders. 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 examined the amount Illinois Tool Works Inc. pays its CEO, and compared it to the amount paid by other large companies. We found that it pays well over the median amount paid in the benchmark group.

One might like to have seen stronger growth, but shareholder returns have been pleasing, over the last three years. So, considering these tasty returns, the CEO compensation may be quite appropriate. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Illinois Tool Works.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.