Does Microsoft Corporation’s (NASDAQ:MSFT) CEO Pay Compare Well With Peers? - Simply Wall St

In 2014 Satya Nadella was appointed CEO of Microsoft Corporation (NASDAQ:MSFT). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Microsoft

How Does Satya Nadella’s Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Microsoft Corporation has a market cap of US$1.0t, and reported total annual CEO compensation of US$26m for the year to June 2018. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$1.5m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over US$8.0b, we found that their 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.

As you can see, Satya Nadella is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Microsoft Corporation is paying too much. 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 Microsoft has changed over time.

NasdaqGS:MSFT CEO Compensation, October 4th 2019

Is Microsoft Corporation Growing?

Microsoft Corporation has increased its earnings per share (EPS) by an average of 22% a year, over the last three years (using a line of best fit). Its revenue is up 14% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. You might want to check this free visual report on analyst forecasts for future earnings.

Has Microsoft Corporation Been A Good Investment?

I think that the total shareholder return of 150%, over three years, would leave most Microsoft Corporation shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary…

We compared the total CEO remuneration paid by Microsoft Corporation, and compared it to remuneration at a group of 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. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. Whatever your view on compensation, you might want to check if insiders are buying or selling Microsoft shares (free trial).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

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