What We Learned About Splunk's (NASDAQ:SPLK) CEO Compensation

This article will reflect on the compensation paid to Doug Merritt who has served as CEO of Splunk Inc. (NASDAQ:SPLK) since 2015. This analysis will also assess whether Splunk pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for Splunk

How Does Total Compensation For Doug Merritt Compare With Other Companies In The Industry?

At the time of writing, our data shows that Splunk Inc. has a market capitalization of US$33b, and reported total annual CEO compensation of US$16m for the year to January 2020. We note that's an increase of 16% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$675k.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$9.8m. This suggests that Doug Merritt is paid more than the median for the industry. Moreover, Doug Merritt also holds US$53m worth of Splunk stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Speaking on an industry level, nearly 14% of total compensation represents salary, while the remainder of 86% is other remuneration. Interestingly, the company has chosen to go down an unconventional route in that it pays a smaller salary to Doug Merritt as compared to non-salary compensation over the one-year period examined. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Splunk Inc.'s Growth

Over the last three years, Splunk Inc. has shrunk its earnings per share by 21% per year. Its revenue is up 15% over the last year.

Few shareholders would be pleased to read that EPS have declined. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Splunk Inc. Been A Good Investment?

Boasting a total shareholder return of 207% over three years, Splunk Inc. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Splunk prefers rewarding its CEO through non-salary benefits. As we touched on above, Splunk Inc. is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. The company isn't growing EPS, but shareholder returns have been impressive over the last three years. So while we don't think, Doug is paid too much, shareholders may want to see some positive EPS growth before pay rises are given out.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 3 warning signs for Splunk that investors should look into moving forward.

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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