In 2017 John Donahoe was appointed CEO of ServiceNow, Inc. (NYSE:NOW). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does John Donahoe's Compensation Compare With Similar Sized Companies?
Our data indicates that ServiceNow, Inc. is worth US$51b, and total annual CEO compensation was reported as US$17m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$750k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
It would therefore appear that ServiceNow, Inc. pays John Donahoe more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at ServiceNow has changed over time.
Is ServiceNow, Inc. Growing?
ServiceNow, Inc. has increased its earnings per share (EPS) by an average of 93% a year, over the last three years (using a line of best fit). It achieved revenue growth of 33% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see. It could be important to check this free visual depiction of what analysts expect for the future.
Has ServiceNow, Inc. Been A Good Investment?
I think that the total shareholder return of 254%, over three years, would leave most ServiceNow, Inc. shareholders smiling. 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.
We compared total CEO remuneration at ServiceNow, Inc. with the amount paid at other large companies. As discussed above, we discovered that the company pays more than the median of that group.
However, the earnings per share growth over three years is certainly impressive. In addition, shareholders have done well over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at ServiceNow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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