Yahoo Finance Is Automatic Data Processing, Inc. (NASDAQ:ADP) Excessively Paying Its CEO?
Carlos Rodriguez has been the CEO of Automatic Data Processing, Inc. (NASDAQ:ADP) since 2011. This analysis aims first to contrast CEO compensation with other large 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. This method should give us information to assess how appropriately the company pays the CEO.
View our latest analysis for Automatic Data Processing
How Does Carlos Rodriguez's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Automatic Data Processing, Inc. has a market cap of US$74b, and reported total annual CEO compensation of US$19m for the year to June 2019. Notably, that's an increase of 52% over the year before. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.1m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Thus we can conclude that Carlos Rodriguez receives more in total compensation than the median of a group of large companies in the same market as Automatic Data Processing, Inc.. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see, below, how CEO compensation at Automatic Data Processing has changed over time.
Is Automatic Data Processing, Inc. Growing?
Over the last three years Automatic Data Processing, Inc. has grown its earnings per share (EPS) by an average of 12% per year (using a line of best fit). It achieved revenue growth of 5.9% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. It could be important to check this free visual depiction of what analysts expect for the future.
Has Automatic Data Processing, Inc. Been A Good Investment?
Most shareholders would probably be pleased with Automatic Data Processing, Inc. for providing a total return of 77% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
In Summary...
We compared the total CEO remuneration paid by Automatic Data Processing, Inc., 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. So, considering this good performance, the CEO compensation may be quite appropriate. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Automatic Data Processing (free visualization of insider trades).
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.
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