Yahoo Finance Does Illinois Tool Works Inc.'s (NYSE:ITW) CEO Pay Matter?
In 2012, E. Santi was appointed CEO of Illinois Tool Works Inc. (NYSE:ITW). 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. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.
Check out our latest analysis for Illinois Tool Works
How Does E. Santi's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Illinois Tool Works Inc. has a market cap of US$49b, and reported total annual CEO compensation of US$15m for the year to December 2019. That's less than last year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.3m. 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$12m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Illinois Tool Works stands. Speaking on an industry level, we can see that nearly 16% of total compensation represents salary, while the remainder of 84% is other remuneration. Readers will want to know that Illinois Tool Works pays a modest slice of remuneration through salary, as compared to the wider sector.
Thus we can conclude that E. Santi receives more in total compensation than the median of a group of large companies in the same market as Illinois Tool Works Inc.. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. You can see a visual representation of the CEO compensation at Illinois Tool Works, below.
Is Illinois Tool Works Inc. Growing?
On average over the last three years, Illinois Tool Works Inc. has seen earnings per share (EPS) move in a favourable direction by 12% each year (using a line of best fit). In the last year, its revenue is down 4.5%.
This demonstrates that the company has been improving recently. A good result. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. You might want to check this free visual report on analyst forecasts for future earnings.
Has Illinois Tool Works Inc. Been A Good Investment?
Illinois Tool Works Inc. has served shareholders reasonably well, with a total return of 20% 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...
We compared total CEO remuneration at Illinois Tool Works Inc. with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. Looking at the same time period, we think that the shareholder returns are respectable. While it may be worth researching further, we don't see a problem with the CEO pay, given the good EPS growth. Shifting gears from CEO pay for a second, we've picked out 2 warning signs for Illinois Tool Works that investors should be aware of in a dynamic business environment.
If you want to buy a stock that is better than Illinois Tool Works, this free list of high return, low debt companies is a great place to look.
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.
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