Yahoo Finance Is Merck & Co., Inc.'s (NYSE:MRK) CEO Paid At A Competitive Rate?
In 2011, Ken Frazier was appointed CEO of Merck & Co., Inc. (NYSE:MRK). 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 we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
View our latest analysis for Merck
How Does Ken Frazier's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Merck & Co., Inc. has a market cap of US$195b, and reported total annual CEO compensation of US$28m for the year to December 2019. Notably, that's an increase of 32% over the year before. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.7m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$12m. (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).
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Talking in terms of the sector, salary represented approximately 27% of total compensation out of all the companies we analysed, while other remuneration made up 73% of the pie. It's interesting to note that Merck allocates a smaller portion of compensation to salary in comparison to the broader industry.
It would therefore appear that Merck & Co., Inc. pays Ken Frazier more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. You can see, below, how CEO compensation at Merck has changed over time.
Is Merck & Co., Inc. Growing?
On average over the last three years, Merck & Co., Inc. has seen earnings per share (EPS) move in a favourable direction by 50% each year (using a line of best fit). It achieved revenue growth of 12% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. 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 Merck & Co., Inc. Been A Good Investment?
Merck & Co., Inc. has served shareholders reasonably well, with a total return of 31% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
In Summary...
We compared the total CEO remuneration paid by Merck & Co., 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. We also note that, over the same time frame, shareholder returns haven't been bad. So, considering the EPS growth we do not wish to criticize the level of CEO compensation, though we'd recommend further research on management. Shifting gears from CEO pay for a second, we've picked out 1 warning sign for Merck that investors should be aware of in a dynamic business environment.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
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. Thank you for reading.
