Here's Why We Think Nasdaq, Inc.'s (NASDAQ:NDAQ) CEO Compensation Looks Fair for the time being

Key Insights

• Nasdaq's Annual General Meeting to take place on 11th of June
• Total pay for CEO Adena Friedman includes US$1.25m salary
• Total compensation is similar to the industry average
• Over the past three years, Nasdaq's EPS fell by 6.2% and over the past three years, the total shareholder return was 10%

Despite Nasdaq, Inc.'s (NASDAQ:NDAQ) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. Some of these issues will occupy shareholders' minds as the AGM rolls around on 11th of June. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

View our latest analysis for Nasdaq

Comparing Nasdaq, Inc.'s CEO Compensation With The Industry

At the time of writing, our data shows that Nasdaq, Inc. has a market capitalization of US$34b, and reported total annual CEO compensation of US$18m for the year to December 2023. That's a notable decrease of 34% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.3m.

On comparing similar companies in the American Capital Markets industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$17m. This suggests that Nasdaq remunerates its CEO largely in line with the industry average. What's more, Adena Friedman holds US$109m 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$1.3m	US$1.3m	7%
Other	US$17m	US$27m	93%
Total Compensation	US$18m	US$28m	100%

On an industry level, around 9% of total compensation represents salary and 91% is other remuneration. It's interesting to note that Nasdaq 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 Nasdaq, Inc.'s Growth Numbers

Nasdaq, Inc. has reduced its earnings per share by 6.2% a year over the last three years. In the last year, its revenue changed by just 0.3%.

The decline in EPS is a bit concerning. And the flat revenue is seriously uninspiring. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Nasdaq, Inc. Been A Good Investment?

Nasdaq, Inc. has generated a total shareholder return of 10% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 2 warning signs for Nasdaq (of which 1 is concerning!) that you should know about in order to have a holistic understanding of the stock.

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.