Brent Shafer became the CEO of Cerner Corporation ( NASDAQ:CERN ) in 2018, 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 assess whether Cerner pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
See our latest analysis for Cerner
How Does Total Compensation For Brent Shafer Compare With Other Companies In The Industry?
At the time of writing, our data shows that Cerner Corporation has a market capitalization of US$22b, and reported total annual CEO compensation of US$13m for the year to December 2019. We note that's an increase of 29% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$800k.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$9.0m. Hence, we can conclude that Brent Shafer is remunerated higher than the industry median.
| Component | 2019 | 2018 | Proportion (2019) |
| Salary | US$800k | US$729k | 6% |
| Other | US$12m | US$9.0m | 94% |
| Total Compensation | US$13m | US$9.7m | 100% |
On an industry level, roughly 15% of total compensation represents salary and 85% is other remuneration. Cerner pays a modest slice of remuneration through salary, as compared to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Cerner Corporation's Growth
Over the last three years, Cerner Corporation has shrunk its earnings per share by 6.1% per year. Its revenue is up 1.5% over the last year.
Overall this is not a very positive result for shareholders. The fairly low revenue growth fails to impress given that the EPS is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings. .
Has Cerner Corporation Been A Good Investment?
Cerner Corporation has not done too badly by shareholders, with a total return of 8.0%, over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
In Summary...
As previously discussed, Brent is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. This doesn't look great when you realize that the company has been suffering from negative EPS growth for the last three years. And shareholder returns are decent but not great. So you may want to delve deeper, because we don't think the amount Brent makes is justifiable.