How Much Did eBay Inc's (NASDAQ:EBAY) CEO Pocket Last Year?

Leading eBay Inc (NASDAQ:EBAY) as the CEO, Devin Wenig took the company to a valuation of US$43.66B. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. Today we will assess Wenig’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. Check out our latest analysis for eBay

What has been the trend in EBAY's earnings?

Earnings is a powerful indication of EBAY's ability to invest shareholders' funds and generate returns. Therefore I will use earnings as a proxy of Wenig's performance in the past year. Recently, EBAY released negative earnings of -US$1.01B , compared to the previous year's positive earnings. Furthermore, EBAY hasn’t always been loss-making, with an average EPS of US$2.18 over the past five years. In the situation of unprofitability the company may be going through a period of reinvestment and growth, or it can be a sign of some headwind. In any event, CEO compensation should be reflective of the current state of the business. In the latest financial report, Wenig's total compensation grew by 9.84% to US$15.94M. Moreover, Wenig's pay is also made up of 71.80% non-cash elements, which means that variabilities in EBAY's share price can impact the real level of what the CEO actually takes home at the end of the day.

What's a reasonable CEO compensation?

Though one size does not fit all, as remuneration should be tailored to the specific company and market, we can evaluate a high-level yardstick to see if EBAY deviates substantially from its peers. This outcome can help shareholders ask the right question about Wenig’s incentive alignment. On average, a US large-cap has a value of $64.9B, produces earnings of $3.6B and remunerates its CEO at roughly $12.2M annually. Typically I would use earnings and market cap to account for variations in performance, however, EBAY's negative earnings reduces the effectiveness of this method. Analyzing the range of remuneration for large-cap executives, it seems like Wenig's pay exceeds its peer group.

What this means for you:

CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Why is Wenig remuneration above that of similar companies? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. If you have not done so already, I urge you to complete your research by taking a look at the following:

1. Governance: To find out more about EBAY's governance, look through our infographic report of the company's board and management.
2. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of EBAY? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.