Is Arrow Electronics, Inc.’s (NYSE:ARW) CEO Being Overpaid?

Mike Long has been the CEO of Arrow Electronics, Inc. (NYSE:ARW) since 2009. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Arrow Electronics

How Does Mike Long’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Arrow Electronics, Inc. has a market cap of US$6.6b, and is paying total annual CEO compensation of US$11m. (This number is for the twelve months until December 2017). While we always look at total compensation first, we note that the salary component is less, at US$1.2m. We looked at a group of companies with market capitalizations from US$4.0b to US$12b, and the median CEO compensation was US$6.2m.

It would therefore appear that Arrow Electronics, Inc. pays Mike Long more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration 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.

The graphic below shows how CEO compensation at Arrow Electronics has changed from year to year.

NYSE:ARW CEO Compensation, March 12th 2019
NYSE:ARW CEO Compensation, March 12th 2019

Is Arrow Electronics, Inc. Growing?

Arrow Electronics, Inc. has increased its earnings per share (EPS) by an average of 6.7% a year, over the last three years (using a line of best fit). Its revenue is up 12% over last year.

This revenue growth could really point to a brighter future. And the improvement in earnings per share is modest but respectable. So while we’d stop just short of calling this a top performer, but we think it is well worth watching. Shareholders might be interested in this free visualization of analyst forecasts.

Has Arrow Electronics, Inc. Been A Good Investment?

Arrow Electronics, Inc. has generated a total shareholder return of 28% over three years, so most shareholders would be reasonably content. But they probably wouldn’t be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary…

We compared the total CEO remuneration paid by Arrow Electronics, Inc., and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

Over the last three years returns to investors have been uninspiring, and we would have liked to see stronger business growth. So it’s certainly hard to argue that the CEO is modestly paid, although we don’t see the remuneration as an issue. So you may want to check if insiders are buying Arrow Electronics shares with their own money (free access).

If you want to buy a stock that is better than Arrow Electronics, this free list of high return, low debt companies is a great place to look.

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.