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Steve Sanghi became the CEO of Microchip Technology Incorporated (NASDAQ:MCHP) in 1991, and we think it’s a good time to look at the executive’s compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Check out our latest analysis for Microchip Technology
How Does Total Compensation For Steve Sanghi Compare With Other Companies In The Industry?
According to our data, Microchip Technology Incorporated has a market capitalization of US$29b, and paid its CEO total annual compensation worth US$6.9m over the year to March 2020. That’s a notable decrease of 46% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$811k.
For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$11m. This suggests that Steve Sanghi is paid below the industry median. Moreover, Steve Sanghi also holds US$561m worth of Microchip Technology stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | US$811k | US$750k | 12% |
| Other | US$6.1m | US$12m | 88% |
| Total Compensation | US$6.9m | US$13m | 100% |
On an industry level, roughly 15% of total compensation represents salary and 85% is other remuneration. Microchip Technology pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Microchip Technology Incorporated’s Growth Numbers
Over the past three years, Microchip Technology Incorporated has seen its earnings per share (EPS) grow by 9.4% per year. Its revenue is down 3.6% over the previous year.
We generally like to see a little revenue growth, but it is good to see a modest EPS growth at least. These two metrics are moving in different directions, so while it’s hard to be confident judging performance, we think the stock is worth watching. Historical performance can sometimes be a good indicator on what’s coming up next but if you want to peer into the company’s future you might be interested in this free visualization of analyst forecasts.
Has Microchip Technology Incorporated Been A Good Investment?
Microchip Technology Incorporated has generated a total shareholder return of 30% over three years, so most shareholders would be reasonably content. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.
To Conclude…
As we noted earlier, Microchip Technology pays its CEO lower than the norm for similar-sized companies belonging to the same industry. However, EPS growth and shareholder returns over the past three years have not impressed us. Consequently, despite CEO compensation being reasonable by all accounts, shareholders will likely want to see more growth before they agree to a potential bump.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That’s why we did our research, and identified 4 warning signs for Microchip Technology (of which 1 doesn’t sit too well with us!) that you should know about in order to have a holistic understanding of the stock.
Switching gears from Microchip Technology, if you’re hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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