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. After that, we will consider the growth in the business. 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.
How Does E. Santi's Compensation Compare With Similar Sized Companies?
According to our data, Illinois Tool Works Inc. has a market capitalization of US$52b, and paid its CEO total annual compensation worth US$18m over the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.3m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. 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. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).
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. 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 Illinois Tool Works has changed over time.
Is Illinois Tool Works Inc. Growing?
On average over the last three years, Illinois Tool Works Inc. has grown earnings per share (EPS) by 9.5% each year (using a line of best fit). In the last year, its revenue is down 3.1%.
I would argue that the lack of revenue growth in the last year is less than ideal, but it is good to see EPS growth. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. You might want to check this free visual report on analyst forecasts for future earnings.
Has Illinois Tool Works Inc. Been A Good Investment?
Boasting a total shareholder return of 52% over three years, Illinois Tool Works Inc. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
We compared total CEO remuneration at Illinois Tool Works Inc. with the amount paid at other large companies. As discussed above, we discovered that the company pays more than the median of that group.
While we generally prefer to see stronger EPS growth, there's no arguing with the strong returns to shareholders, over the last three years. Considering this fine result for investors, we daresay the CEO compensation might be apt. Whatever your view on compensation, you might want to check if insiders are buying or selling Illinois Tool Works shares (free trial).
Important note: Illinois Tool Works may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.