How Should Investors React To’s (NYSE:CARS) CEO Pay?

This article will reflect on the compensation paid to T. Vetter who has served as CEO of Inc. (NYSE:CARS) since 2014. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for

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Comparing Inc.’s CEO Compensation With the industry

Our data indicates that Inc. has a market capitalization of US$586m, and total annual CEO compensation was reported as US$4.6m for the year to December 2019. That’s a notable decrease of 8.5% on last year. While this analysis focuses on total compensation, it’s worth acknowledging that the salary portion is lower, valued at US$567k.

On comparing similar companies from the same industry with market caps ranging from US$200m to US$800m, we found that the median CEO total compensation was US$3.1m. Hence, we can conclude that T. Vetter is remunerated higher than the industry median. What’s more, T. Vetter holds US$1.3m worth of shares in the company in their own name.

Component20192018Proportion (2019)
Salary US$567k US$564k 12%
Other US$4.0m US$4.4m 88%
Total CompensationUS$4.6m US$5.0m100%

Speaking on an industry level, nearly 39% of total compensation represents salary, while the remainder of 61% is other remuneration. 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.

NYSE:CARS CEO Compensation September 18th 2020 Inc.’s Growth Inc. has reduced its earnings per share by 129% a year over the last three years. Its revenue is down 13% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. 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 Inc. Been A Good Investment?

With a three year total loss of 67% for the shareholders, Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary…

As we touched on above, 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. This doesn’t look good against shareholder returns, which have been negative for the past three years. Arguably worse, we’ve been waiting for positive EPS growth for the last three years. Considering such poor performance, we think shareholders might be concerned if the CEO’s compensation were to grow.

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. We’ve identified 1 warning sign for that investors should be aware of in a dynamic business environment.

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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