We Take A Look At Why Automatic Data Processing, Inc.'s (NASDAQ:ADP) CEO Compensation Is Well Earned

Key Insights

• Automatic Data Processing's Annual General Meeting to take place on 6th of November
• Total pay for CEO Maria Black includes US$1.20m salary
• Total compensation is similar to the industry average
• Automatic Data Processing's EPS grew by 15% over the past three years while total shareholder return over the past three years was 36%

The performance at Automatic Data Processing, Inc. (NASDAQ:ADP) has been quite strong recently and CEO Maria Black has played a role in it. Shareholders will have this at the front of their minds in the upcoming AGM on 6th of November. This would also be a chance for them to hear the board review the financial results, discuss future company strategy and vote on any resolutions such as executive remuneration. We think the CEO has done a pretty decent job and we discuss why the CEO compensation is appropriate.

See our latest analysis for Automatic Data Processing

How Does Total Compensation For Maria Black Compare With Other Companies In The Industry?

At the time of writing, our data shows that Automatic Data Processing, Inc. has a market capitalization of US$117b, and reported total annual CEO compensation of US$16m for the year to June 2024. We note that's an increase of 49% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.2m.

For comparison, other companies in the American Professional Services industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$14m. So it looks like Automatic Data Processing compensates Maria Black in line with the median for the industry. Furthermore, Maria Black directly owns US$12m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	US$1.2m	US$966k	8%
Other	US$15m	US$9.7m	92%
Total Compensation	US$16m	US$11m	100%

On an industry level, roughly 15% of total compensation represents salary and 85% is other remuneration. It's interesting to note that Automatic Data Processing allocates a smaller portion of compensation to salary 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 Automatic Data Processing, Inc.'s Growth Numbers

Automatic Data Processing, Inc.'s earnings per share (EPS) grew 15% per year over the last three years. Its revenue is up 6.6% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Automatic Data Processing, Inc. Been A Good Investment?

We think that the total shareholder return of 36%, over three years, would leave most Automatic Data Processing, Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

The company's solid performance might have made most shareholders happy, possibly making CEO remuneration the least of the matters to be discussed in the AGM. However, investors will get the chance to engage on key strategic initiatives and future growth opportunities for the company and set their longer-term expectations.

If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Automatic Data Processing.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.