Is VMware, Inc.'s (NYSE:VMW) CEO Being Overpaid?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Pat Gelsinger became the CEO of VMware, Inc. (NYSE:VMW) in 2012. First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. 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.” data-reactid=”18″>Pat Gelsinger became the CEO of VMware, Inc. (NYSE:VMW) in 2012. First, this article will compare CEO compensation with compensation at other large companies. After that, we will consider the growth in the business. 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.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=" Check out our latest analysis for VMware ” data-reactid=”19″>Check out our latest analysis for VMware

How Does Pat Gelsinger’s Compensation Compare With Similar Sized Companies?

According to our data, VMware, Inc. has a market capitalization of US$67b, and paid its CEO total annual compensation worth US$24m over the year to February 2019. We think total compensation is more important but we note that the CEO salary is lower, at US$1.0m. Importantly, there may be performance hurdles relating to the non-salary component 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$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).

As you can see, Pat Gelsinger is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean VMware, Inc. is paying too much. 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 a visual representation of the CEO compensation at VMware, below.

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Is VMware, Inc. Growing?

On average over the last three years, VMware, Inc. has grown earnings per share (EPS) by 63% each year (using a line of best fit). Its revenue is up 14% over last year.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's a real positive to see this sort of growth in a single year. That suggests a healthy and growing business. Shareholders might be interested in this free visualization of analyst forecasts.” data-reactid=”38″>Overall this is a positive result for shareholders, showing that the company has improved in recent years. It’s a real positive to see this sort of growth in a single year. That suggests a healthy and growing business. Shareholders might be interested in this free visualization of analyst forecasts.

Has VMware, Inc. Been A Good Investment?

Most shareholders would probably be pleased with VMware, Inc. for providing a total return of 154% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary…

We compared the total CEO remuneration paid by VMware, Inc., and compared it to remuneration at a group of other large companies. Our data suggests that it pays above the median CEO pay within that group.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="However we must not forget that the EPS growth has been very strong over three years. In addition, shareholders have done well over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling VMware (free visualization of insider trades).” data-reactid=”43″>However we must not forget that the EPS growth has been very strong over three years. In addition, shareholders have done well over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling VMware (free visualization of insider trades).

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies. ” data-reactid=”44″>Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="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.

If you spot an error that warrants correction, please contact the editor at [email protected]. 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.” data-reactid=”45″>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.

If you spot an error that warrants correction, please contact the editor at [email protected]. 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.