Shareholders Will Most Likely Find Paychex, Inc.'s (NASDAQ:PAYX) CEO Compensation Acceptable

Under the guidance of CEO Marty Mucci, Paychex, Inc. (NASDAQ:PAYX) has performed reasonably well recently. As shareholders go into the upcoming AGM on 14 October 2021, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. Here is our take on why we think the CEO compensation looks appropriate.

View our latest analysis for Paychex

Comparing Paychex, Inc.'s CEO Compensation With the industry

Our data indicates that Paychex, Inc. has a market capitalization of US$43b, and total annual CEO compensation was reported as US$9.6m for the year to May 2021. Notably, that's an increase of 19% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$898k.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$9.4m. So it looks like Paychex compensates Marty Mucci in line with the median for the industry. Moreover, Marty Mucci also holds US$46m worth of Paychex stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2021	2020	Proportion (2021)
Salary	US$898k	US$993k	9%
Other	US$8.7m	US$7.1m	91%
Total Compensation	US$9.6m	US$8.1m	100%

Talking in terms of the industry, salary represented approximately 18% of total compensation out of all the companies we analyzed, while other remuneration made up 82% of the pie. It's interesting to note that Paychex 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.

A Look at Paychex, Inc.'s Growth Numbers

Over the past three years, Paychex, Inc. has seen its earnings per share (EPS) grow by 5.7% per year. In the last year, its revenue is up 5.7%.

We would argue that the improvement in revenue is good, but isn't particularly impressive, but it is good to see modest EPS growth. It's clear the performance has been quite decent, but it it falls short of outstanding,based on this information. 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 Paychex, Inc. Been A Good Investment?

Boasting a total shareholder return of 92% over three years, Paychex, Inc. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

The company's decent performance might have made most shareholders happy, possibly making CEO remuneration the least of the concerns to be discussed in the upcoming AGM. Despite the pleasing results, we still think that any proposed increases to CEO compensation will be examined based on a case by case basis and linked to performance outcomes.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Paychex that investors should think about before committing capital to this 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.

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.

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