Is Amazon.com, Inc.’s (NASDAQ:AMZN) CEO Pay Justified?

Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!

In 1996 Jeff Bezos was appointed CEO of Amazon.com, Inc. (NASDAQ:AMZN). First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Amazon.com

How Does Jeff Bezos’s Compensation Compare With Similar Sized Companies?

According to our data, Amazon.com, Inc. has a market capitalization of US$790b, and pays its CEO total annual compensation worth US$1.7m. (This is based on the year to 2017). We think total compensation is more important but we note that the CEO salary is lower, at US$82k. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO compensation to be US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).

Most shareholders would consider it a positive that Jeff Bezos takes less compensation than the CEOs of most other large companies, leaving more for shareholders. Though positive, it’s important we delve into the performance of the actual business.

You can see, below, how CEO compensation at Amazon.com has changed over time.

NasdaqGS:AMZN CEO Compensation, February 19th 2019
NasdaqGS:AMZN CEO Compensation, February 19th 2019

Is Amazon.com, Inc. Growing?

Amazon.com, Inc. has increased its earnings per share (EPS) by an average of 72% a year, over the last three years (using a line of best fit). It achieved revenue growth of 31% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. It could be important to check this free visual depiction of what analysts expect for the future.

Has Amazon.com, Inc. Been A Good Investment?

Boasting a total shareholder return of 187% over three years, Amazon.com, Inc. has done well by shareholders. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.

In Summary…

It looks like Amazon.com, Inc. pays its CEO less than the average at large companies. Considering the underlying business is growing earnings, this would suggest the pay is modest. The strong history of shareholder returns might even have some thinking that Jeff Bezos deserves a raise!

It is relatively rare to see a modestly paid CEO when performance is so impressive. The cherry on top would be if company insiders are buying shares with their own money. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Amazon.com.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. On rare occasion, data errors may occur. Thank you for reading.