Merck & Co., Inc.'s (NYSE:MRK) CEO Will Probably Find It Hard To See A Huge Raise This Year

Key Insights

• Merck will host its Annual General Meeting on 27th of May
• Salary of US$1.62m is part of CEO Rob Davis's total remuneration
• The total compensation is similar to the average for the industry
• Over the past three years, Merck's EPS grew by 8.1% and over the past three years, the total loss to shareholders 10%

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As many shareholders of Merck & Co., Inc. (NYSE:MRK) will be aware, they have not made a gain on their investment in the past three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 27th of May 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 Merck

Comparing Merck & Co., Inc.'s CEO Compensation With The Industry

Our data indicates that Merck & Co., Inc. has a market capitalization of US$191b, and total annual CEO compensation was reported as US$23m for the year to December 2024. We note that's an increase of 14% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.6m.

On comparing similar companies in the American Pharmaceuticals industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$21m. So it looks like Merck compensates Rob Davis in line with the median for the industry. What's more, Rob Davis holds US$34m 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$1.6m	US$1.6m	7%
Other	US$22m	US$19m	93%
Total Compensation	US$23m	US$20m	100%

On an industry level, roughly 26% of total compensation represents salary and 74% is other remuneration. In Merck's case, non-salary compensation represents a greater slice of total remuneration, 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.

Merck & Co., Inc.'s Growth

Merck & Co., Inc.'s earnings per share (EPS) grew 8.1% per year over the last three years. Its revenue is up 4.1% over the last year.

We're not particularly impressed by the revenue growth, but it is good to see modest EPS growth. Considering these factors we'd say performance has been pretty decent, though not amazing. 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 Merck & Co., Inc. Been A Good Investment?

With a three year total loss of 10% for the shareholders, Merck & Co., Inc. would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. 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.

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. We've identified 1 warning sign for Merck that investors should be aware of in a dynamic business environment.

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.