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How Should Investors React To U.S. Bancorp's (NYSE:USB) CEO Pay?

In 2017, Andy Cecere was appointed CEO of U.S. Bancorp (NYSE:USB). 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. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for U.S. Bancorp

How Does Andy Cecere's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that U.S. Bancorp has a market cap of US$55b, and reported total annual CEO compensation of US$19m for the year to December 2019. Notably, that's an increase of 40% over the year before. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.2m. 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. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

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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 43% of total compensation out of all the companies we analysed, while other remuneration made up 57% of the pie. It's interesting to note that U.S. Bancorp allocates a smaller portion of compensation to salary in comparison to the broader industry.

It would therefore appear that U.S. Bancorp pays Andy Cecere 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 U.S. Bancorp has changed over time.

NYSE:USB CEO Compensation May 1st 2020
NYSE:USB CEO Compensation May 1st 2020

Is U.S. Bancorp Growing?

Over the last three years U.S. Bancorp has seen earnings per share (EPS) move in a positive direction by an average of 8.6% per year (using a line of best fit). Revenue was pretty flat on last year.

I would prefer it if there was revenue growth, but the improvement in EPS is good. It's hard to reach a conclusion about business performance right now. This may be one to watch. It could be important to check this free visual depiction of what analysts expect for the future.

Has U.S. Bancorp Been A Good Investment?

With a three year total loss of 23%, U.S. Bancorp would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared the total CEO remuneration paid by U.S. Bancorp, 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.

While we have not been overly impressed by the business performance, the shareholder returns, over three years, have been disappointing. So shareholders might not feel great about the fact that CEO pay increased on last year. Although we'd stop short of calling it inappropriate, we think the CEO compensation is probably more on the generous side of things. On another note, we've spotted 1 warning sign for U.S. Bancorp that investors should look into moving forward.

If you want to buy a stock that is better than U.S. Bancorp, this free list of high return, low debt companies is a great place to look.

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.