The CEO of Live Oak Bancshares, Inc. (NASDAQ:LOB) is Chip Mahan, and this article examines the executive’s compensation against the backdrop of overall company performance. This analysis will also assess whether Live Oak Bancshares pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Check out our latest analysis for Live Oak Bancshares
Comparing Live Oak Bancshares, Inc.’s CEO Compensation With the industry
According to our data, Live Oak Bancshares, Inc. has a market capitalization of US$618m, and paid its CEO total annual compensation worth US$716k over the year to December 2019. That’s a notable decrease of 27% on last year. In particular, the salary of US$510.6k, makes up a huge portion of the total compensation being paid to the CEO.
On examining similar-sized companies in the industry with market capitalizations between US$400m and US$1.6b, we discovered that the median CEO total compensation of that group was US$2.0m. In other words, Live Oak Bancshares pays its CEO lower than the industry median. Furthermore, Chip Mahan directly owns US$95m worth of shares in the company, implying that they are deeply invested in the company’s success.
| Component | 2019 | 2018 | Proportion (2019) |
| Salary | US$511k | US$511k | 71% |
| Other | US$206k | US$476k | 29% |
| Total Compensation | US$716k | US$987k | 100% |
Talking in terms of the industry, salary represented approximately 43% of total compensation out of all the companies we analyzed, while other remuneration made up 57% of the pie. It’s interesting to note that Live Oak Bancshares pays out a greater portion of remuneration through salary, compared to the industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
Live Oak Bancshares, Inc.’s Growth
Over the last three years, Live Oak Bancshares, Inc. has shrunk its earnings per share by 23% per year. It saw its revenue drop 3.9% over the last year.
Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Live Oak Bancshares, Inc. Been A Good Investment?
Since shareholders would have lost about 39% over three years, some Live Oak Bancshares, Inc. investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
To Conclude…
As previously discussed, Chip is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Over the last three years, shareholder returns have been downright disappointing, and earnings growth has been equally disappointing. We can’t say the CEO compensation is high, but shareholders will be cold to a bump at this stage, considering negative investor returns.
CEO compensation is an important area to keep your eyes on, but we’ve also need to pay attention to other attributes of the company. We did our research and identified 2 warning signs (and 1 which is potentially serious) in Live Oak Bancshares we think you should know about.
Important note: Live Oak Bancshares is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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