In 2006 Jay Shah was appointed CEO of Hersha Hospitality Trust (NYSE:HT). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Jay Shah’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Hersha Hospitality Trust has a market cap of US$591m, and reported total annual CEO compensation of US$4.7m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$770k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations from US$200m to US$800m, and the median CEO total compensation was US$1.7m.
As you can see, Jay Shah is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Hersha Hospitality Trust is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
You can see, below, how CEO compensation at Hersha Hospitality Trust has changed over time.
Is Hersha Hospitality Trust Growing?
Hersha Hospitality Trust has reduced its earnings per share by an average of 97% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 9.6% over the last year.
Few shareholders would be pleased to read that earnings per share are lower over three years. The modest increase in revenue in the last year isn’t enough to make me overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.
Has Hersha Hospitality Trust Been A Good Investment?
With a three year total loss of 21%, Hersha Hospitality Trust would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.
We compared total CEO remuneration at Hersha Hospitality Trust with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.
Neither earnings per share nor revenue have been growing sufficiently to impress us, over the last three years. Over the same period, investors would have come away with nothing in the way of share price gains. Some might well form the view that the CEO is paid too generously! Whatever your view on compensation, you might want to check if insiders are buying or selling Hersha Hospitality Trust shares (free trial).
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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