Here's Why Shareholders May Want To Be Cautious With Increasing NIKE, Inc.'s (NYSE:NKE) CEO Pay Packet

Key Insights

• NIKE's Annual General Meeting to take place on 12th of September
• CEO John Donahoe's total compensation includes salary of US$1.50m
• The total compensation is 404% higher than the average for the industry
• NIKE's EPS grew by 27% over the past three years while total shareholder loss over the past three years was 10%

In the past three years, shareholders of NIKE, Inc. (NYSE:NKE) have seen a loss on their investment. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. The AGM coming up on the 12th of September could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

Check out our latest analysis for NIKE

How Does Total Compensation For John Donahoe Compare With Other Companies In The Industry?

At the time of writing, our data shows that NIKE, Inc. has a market capitalization of US$153b, and reported total annual CEO compensation of US$33m for the year to May 2023. That's a notable increase of 14% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.5m.

For comparison, other companies in the American Luxury industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$6.5m. Hence, we can conclude that John Donahoe is remunerated higher than the industry median. What's more, John Donahoe holds US$19m 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$1.5m	US$1.5m	5%
Other	US$31m	US$27m	95%
Total Compensation	US$33m	US$29m	100%

Talking in terms of the industry, salary represented approximately 24% of total compensation out of all the companies we analyzed, while other remuneration made up 76% of the pie. Investors may find it interesting that NIKE paid a marginal salary to John Donahoe, over the past year, focusing on non-salary compensation instead. 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 NIKE, Inc.'s Growth Numbers

Over the past three years, NIKE, Inc. has seen its earnings per share (EPS) grow by 27% per year. Its revenue is up 9.6% 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 NIKE, Inc. Been A Good Investment?

Given the total shareholder loss of 10% over three years, many shareholders in NIKE, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

NIKE prefers rewarding its CEO through non-salary benefits. Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling NIKE (free visualization of insider trades).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.