Frederick Smith has been the CEO of FedEx Corporation (NYSE:FDX) since 1998, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether FedEx pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
See our latest analysis for FedEx
Comparing FedEx Corporation's CEO Compensation With the industry
According to our data, FedEx Corporation has a market capitalization of US$74b, and paid its CEO total annual compensation worth US$11m over the year to May 2020. That's a notable decrease of 30% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.2m.
In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$6.4m. Accordingly, our analysis reveals that FedEx Corporation pays Frederick Smith north of the industry median. Furthermore, Frederick Smith directly owns US$5.5b worth of shares in the company, implying that they are deeply invested in the company's success.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | US$1.2m | US$1.4m | 11% |
| Other | US$10.0m | US$15m | 89% |
| Total Compensation | US$11m | US$16m | 100% |
On an industry level, around 18% of total compensation represents salary and 82% is other remuneration. It's interesting to note that FedEx allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at FedEx Corporation's Growth Numbers
FedEx Corporation has reduced its earnings per share by 14% a year over the last three years. It achieved revenue growth of 2.6% over the last year.
Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 FedEx Corporation Been A Good Investment?
FedEx Corporation has served shareholders reasonably well, with a total return of 31% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
In Summary...
As we noted earlier, FedEx pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Unfortunately, EPS has not grown in three years, failing to impress us. While shareholder returns are acceptable, they don't delight. So you may want to delve deeper, because we don't think the amount Frederick makes is justifiable.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 3 warning signs for FedEx that investors should be aware of in a dynamic business environment.
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.
If you decide to trade FedEx, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
Valuation is complex, but we're here to simplify it.
Discover if FedEx might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Access Free AnalysisThis 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. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.