Tim Cook has been the CEO of Apple Inc. (NASDAQ:AAPL) since 2011. First, this article will compare CEO compensation with compensation at 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.
How Does Tim Cook’s Compensation Compare With Similar Sized Companies?
Our data indicates that Apple Inc. is worth US$822b, and total annual CEO compensation is US$16m. (This figure is for the year to September 2018). That’s a notable increase of 22% on last year. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$3.0m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO compensation was US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).
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 a visual representation of the CEO compensation at Apple, below.
Is Apple Inc. Growing?
On average over the last three years, Apple Inc. has grown earnings per share (EPS) by 12% each year (using a line of best fit). Its revenue is up 9.4% over last year.
This demonstrates that the company has been improving recently. A good result. It’s nice to see a little revenue growth, as this is consistent with healthy business conditions. Shareholders might be interested in this free visualization of analyst forecasts.
Has Apple Inc. Been A Good Investment?
Most shareholders would probably be pleased with Apple Inc. for providing a total return of 82% over three years. 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.
We compared total CEO remuneration at Apple Inc. with the amount paid at other large companies. We found that it pays well over the median amount paid in the benchmark group.
However we must not forget that the EPS growth has been very strong over three years. Even better, returns to shareholders have been plentiful, over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. So you may want to check if insiders are buying Apple shares with their own money (free access).
Important note: Apple may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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