Shareholders May Not Be So Generous With ResMed Inc.'s (NYSE:RMD) CEO Compensation And Here's Why

Key Insights

• ResMed to hold its Annual General Meeting on 20th of November
• Total pay for CEO Mick Farrell includes US$1.17m salary
• Total compensation is similar to the industry average
• ResMed's three-year loss to shareholders was 4.7% while its EPS grew by 30% over the past three years

As many shareholders of ResMed Inc. (NYSE:RMD) will be aware, they have not made a gain on their investment in the past three years. 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 20th of November could be an opportunity for shareholders to bring these concerns to the board's attention. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for ResMed

Comparing ResMed Inc.'s CEO Compensation With The Industry

According to our data, ResMed Inc. has a market capitalization of US$36b, and paid its CEO total annual compensation worth US$14m over the year to June 2024. That's mostly flat as compared to the prior year's compensation. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.2m.

On comparing similar companies in the American Medical Equipment industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$14m. So it looks like ResMed compensates Mick Farrell in line with the median for the industry. What's more, Mick Farrell holds US$116m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2024	2023	Proportion (2024)
Salary	US$1.2m	US$1.1m	8%
Other	US$13m	US$13m	92%
Total Compensation	US$14m	US$14m	100%

Speaking on an industry level, nearly 23% of total compensation represents salary, while the remainder of 77% is other remuneration. It's interesting to note that ResMed 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.

ResMed Inc.'s Growth

ResMed Inc.'s earnings per share (EPS) grew 30% per year over the last three years. In the last year, its revenue is up 9.9%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. 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 ResMed Inc. Been A Good Investment?

Since shareholders would have lost about 4.7% over three years, some ResMed Inc. investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

Whatever your view on compensation, you might want to check if insiders are buying or selling ResMed shares (free trial).

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.