Is Apple Inc. (NASDAQ:AAPL) Excessively Paying Its CEO?

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Tim Cook has been the CEO of Apple Inc. (NASDAQ:AAPL) since 2011. This analysis aims first to contrast CEO compensation with other large 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. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Apple

How Does Tim Cook’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Apple Inc. has a market cap of US$926b, and is paying total annual CEO compensation of US$16m. (This is based on the year to September 2018). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$3.0m. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.

Thus we can conclude that Tim Cook receives more in total compensation than the median of a group of large companies in the same market as Apple Inc.. However, this doesn’t necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

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

NasdaqGS:AAPL CEO Compensation, July 10th 2019
NasdaqGS:AAPL CEO Compensation, July 10th 2019

Is Apple Inc. Growing?

Apple Inc. has increased its earnings per share (EPS) by an average of 14% a year, over the last three years (using a line of best fit). Its revenue is up 4.5% over last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It’s also good to see modest revenue growth, suggesting the underlying business is healthy.

Has Apple Inc. Been A Good Investment?

Most shareholders would probably be pleased with Apple Inc. for providing a total return of 117% over three years. 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…

We compared total CEO remuneration at Apple Inc. with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. In addition, shareholders have done well over the same time period. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. So you may want to check if insiders are buying Apple shares with their own money (free access).

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.

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. Thank you for reading.