We Think Automatic Data Processing, Inc.'s (NASDAQ:ADP) CEO Compensation Looks Fair

Key Insights

• Automatic Data Processing's Annual General Meeting to take place on 8th of November
• CEO Maria Black's total compensation includes salary of US$966.0k
• The overall pay is comparable to the industry average
• Automatic Data Processing's total shareholder return over the past three years was 36% while its EPS grew by 14% over the past three years

It would be hard to discount the role that CEO Maria Black has played in delivering the impressive results at Automatic Data Processing, Inc. (NASDAQ:ADP) recently. Shareholders will have this at the front of their minds in the upcoming AGM on 8th of November. The focus will probably be on the future company strategy as shareholders cast their votes on resolutions such as executive remuneration and other matters. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.

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$90b, and reported total annual CEO compensation of US$11m for the year to June 2023. That's a notable increase of 55% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$966k.

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$11m. This suggests that Automatic Data Processing remunerates its CEO largely in line with the industry average. What's more, Maria Black holds US$7.0m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	US$966k	US$709k	9%
Other	US$9.7m	US$6.2m	91%
Total Compensation	US$11m	US$6.9m	100%

Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. It's interesting to note that Automatic Data Processing allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Automatic Data Processing, Inc.'s Growth Numbers

Automatic Data Processing, Inc. has seen its earnings per share (EPS) increase by 14% a year over the past three years. Its revenue is up 8.5% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. 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. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Given the company's decent performance, the CEO remuneration policy might not be shareholders' central point of focus in the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for Automatic Data Processing that investors should think about before committing capital to this 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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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.