This article will reflect on the compensation paid to Mike Kaufmann who has served as CEO of Cardinal Health, Inc. (NYSE:CAH) since 2018. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
How Does Total Compensation For Mike Kaufmann Compare With Other Companies In The Industry?
Our data indicates that Cardinal Health, Inc. has a market capitalization of US$13b, and total annual CEO compensation was reported as US$14m for the year to June 2020. Notably, that's a decrease of 8.7% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.3m.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$15m. This suggests that Cardinal Health remunerates its CEO largely in line with the industry average. What's more, Mike Kaufmann holds US$9.7m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, around 17% of total compensation represents salary and 83% is other remuneration. In Cardinal Health's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Cardinal Health, Inc.'s Growth Numbers
Over the last three years, Cardinal Health, Inc. has shrunk its earnings per share by 113% per year. In the last year, its revenue is up 5.1%.
Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Cardinal Health, Inc. Been A Good Investment?
Given the total shareholder loss of 16% over three years, many shareholders in Cardinal Health, Inc. are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
As we noted earlier, Cardinal Health pays its CEO in line with similar-sized companies belonging to the same industry. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. In our study, we found 3 warning signs for Cardinal Health you should be aware of, and 1 of them shouldn't be ignored.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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