In 2014 Bill McDermott was appointed CEO of SAP SE (ETR:SAP). First, this article will compare CEO compensation with compensation at other large 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. This method should give us information to assess how appropriately the company pays the CEO.
How Does Bill McDermott's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that SAP SE has a market cap of €129b, and reported total annual CEO compensation of €12m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at €1.3m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations over €7.3b and the median CEO total compensation was €4.3m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
It would therefore appear that SAP SE pays Bill McDermott 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. 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 SAP has changed over time.
Is SAP SE Growing?
Over the last three years SAP SE has grown its earnings per share (EPS) by an average of 1.5% per year (using a line of best fit). Its revenue is up 11% over last year.
I would argue that the modest growth in revenue is a notable positive. And, while modest, the earnings per share growth is noticeable. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. It could be important to check this free visual depiction of what analysts expect for the future.
Has SAP SE Been A Good Investment?
Most shareholders would probably be pleased with SAP SE for providing a total return of 40% 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.
We examined the amount SAP SE pays its CEO, and compared it to the amount paid by other large companies. Our data suggests that it pays above the median CEO pay within that group.
One might like to have seen stronger growth, but shareholder returns have been pleasing, over the last three years. So, considering these tasty returns, the CEO compensation may be quite appropriate. Shareholders may want to check for free if SAP insiders are buying or selling shares.
If you want to buy a stock that is better than SAP, this free list of high return, low debt companies is a great place to look.
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