Juan Luciano has been the CEO of Archer-Daniels-Midland Company (NYSE:ADM) since 2015, and this article will examine the executive’s compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Check out our latest analysis for Archer-Daniels-Midland
Comparing Archer-Daniels-Midland Company’s CEO Compensation With the industry
Our data indicates that Archer-Daniels-Midland Company has a market capitalization of US$26b, and total annual CEO compensation was reported as US$18m for the year to December 2019. That’s a slight decrease of 7.6% on the prior year. While this analysis focuses on total compensation, it’s worth acknowledging that the salary portion is lower, valued at US$1.4m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$12m. Hence, we can conclude that Juan Luciano is remunerated higher than the industry median. Furthermore, Juan Luciano directly owns US$25m worth of shares in the company, implying that they are deeply invested in the company’s success.
On an industry level, roughly 22% of total compensation represents salary and 78% is other remuneration. Archer-Daniels-Midland pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it’s an indicator that the executive’s salary is tied to company performance.
A Look at Archer-Daniels-Midland Company’s Growth Numbers
Archer-Daniels-Midland Company’s earnings per share (EPS) grew 9.8% per year over the last three years. In the last year, its revenue is up 1.5%.
We would argue that the improvement in revenue is good, but isn’t particularly impressive, but we’re happy with the modest EPS growth. Considering these factors we’d say performance has been pretty decent, though not amazing. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Archer-Daniels-Midland Company Been A Good Investment?
Archer-Daniels-Midland Company has served shareholders reasonably well, with a total return of 21% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
As we noted earlier, Archer-Daniels-Midland pays its CEO higher than the norm for similar-sized companies belonging to the same industry. But the company lacks EPS growth, and returns to shareholders are less than stellar, over the last three years. So while shareholders might not be overly concerned about CEO compensation, we suspect most would prefer to see improved performance, before thinking a bump in pay is in order.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That’s why we did our research, and identified 3 warning signs for Archer-Daniels-Midland (of which 2 can’t be ignored!) that you should know about in order to have a holistic understanding of the stock.
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.
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. 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.
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