Shareholders May Not Be So Generous With ServiceNow, Inc.'s (NYSE:NOW) CEO Compensation And Here's Why
Key Insights
- ServiceNow's Annual General Meeting to take place on 22nd of May
- CEO Bill McDermott's total compensation includes salary of US$1.35m
- The overall pay is 123% above the industry average
- ServiceNow's total shareholder return over the past three years was 149% while its EPS grew by 88% over the past three years
Under the guidance of CEO Bill McDermott, ServiceNow, Inc. (NYSE:NOW) has performed reasonably well recently. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 22nd of May. However, some shareholders will still be cautious of paying the CEO excessively.
See our latest analysis for ServiceNow
Comparing ServiceNow, Inc.'s CEO Compensation With The Industry
At the time of writing, our data shows that ServiceNow, Inc. has a market capitalization of US$215b, and reported total annual CEO compensation of US$38m for the year to December 2024. This means that the compensation hasn't changed much from last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.4m.
On comparing similar companies in the American Software industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$17m. Hence, we can conclude that Bill McDermott is remunerated higher than the industry median. Furthermore, Bill McDermott directly owns US$13m worth of shares in the company, implying that they are deeply invested in the company's success.
| Component | 2024 | 2023 | Proportion (2024) |
| Salary | US$1.4m | US$1.3m | 4% |
| Other | US$36m | US$36m | 96% |
| Total Compensation | US$38m | US$38m | 100% |
On an industry level, around 11% of total compensation represents salary and 89% is other remuneration. ServiceNow has chosen to walk a path less trodden, opting to compensate its CEO with less of a traditional salary and more non-salary rewards over the last year. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
ServiceNow, Inc.'s Growth
ServiceNow, Inc.'s earnings per share (EPS) grew 88% per year over the last three years. It achieved revenue growth of 21% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has ServiceNow, Inc. Been A Good Investment?
Boasting a total shareholder return of 149% over three years, ServiceNow, 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...
ServiceNow prefers rewarding its CEO through non-salary benefits. Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, any decision to raise CEO pay might be met with some objections from the shareholders given that the CEO is already paid higher than the industry average.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 2 warning signs for ServiceNow that investors should look into moving forward.
Switching gears from ServiceNow, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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.