G. Tuttle became the CEO of Silicon Laboratories Inc. (NASDAQ:SLAB) in 2012, 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.
Comparing Silicon Laboratories Inc.’s CEO Compensation With the industry
According to our data, Silicon Laboratories Inc. has a market capitalization of US$4.2b, and paid its CEO total annual compensation worth US$6.0m over the year to December 2019. That’s mostly flat as compared to the prior year’s compensation. While we always look at total compensation first, our analysis shows that the salary component is less, at US$652k.
On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$5.7m. From this we gather that G. Tuttle is paid around the median for CEOs in the industry. Moreover, G. Tuttle also holds US$11m worth of Silicon Laboratories stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
On an industry level, around 15% of total compensation represents salary and 85% is other remuneration. Silicon Laboratories sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it’s an indicator that the executive’s salary is tied to company performance.
A Look at Silicon Laboratories Inc.’s Growth Numbers
Silicon Laboratories Inc. has reduced its earnings per share by 26% a year over the last three years. Its revenue is up 3.0% 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. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 Silicon Laboratories Inc. Been A Good Investment?
Silicon Laboratories Inc. has generated a total shareholder return of 20% over three years, so most shareholders would be reasonably content. But they probably wouldn’t be so happy as to think the CEO should be paid more than is normal, for companies around this size.
As we touched on above, Silicon Laboratories Inc. is currently paying a compensation that’s close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. According to our analysis, Silicon Laboratories is suffering from uninspiring EPS growth, and even though shareholder returns are stable, they are hardly impressive. These figures do not go well against CEO compensation, which is more or less equal to the industry median. We wouldn’t go as far as saying CEO compensation is inappropriate, but we don’t think the executive is underpaid.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That’s why we did some digging and identified 1 warning sign for Silicon Laboratories that investors should think about before committing capital to this stock.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.
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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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