In 2017, Brad Southern was appointed CEO of Louisiana-Pacific Corporation (NYSE:LPX). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Brad Southern’s Compensation Compare With Similar Sized Companies?
According to our data, Louisiana-Pacific Corporation has a market capitalization of US$2.6b, and paid its CEO total annual compensation worth US$5.6m over the year to December 2019. That’s just a smallish increase of 4.4% on last year. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$961k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a selection of companies with market caps ranging from US$2.0b to US$6.4b, we found the median CEO total compensation was US$6.0m.
Pay mix tells us a lot about how a company functions versus the wider industry, and it’s no different in the case of Louisiana-Pacific. Talking in terms of the sector, salary represented approximately 26% of total compensation out of all the companies we analysed, while other remuneration made up 74% of the pie. Louisiana-Pacific sets aside a smaller share of compensation for salary, in comparison to the overall industry.
That means Brad Southern receives fairly typical remuneration for the CEO of a company that size. This doesn’t tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. You can see, below, how CEO compensation at Louisiana-Pacific has changed over time.
Is Louisiana-Pacific Corporation Growing?
On average over the last three years, Louisiana-Pacific Corporation has shrunk earnings per share by 34% each year (measured with a line of best fit). It saw its revenue drop 15% over the last year.
Unfortunately, earnings per share have trended lower over the last three years. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.
Has Louisiana-Pacific Corporation Been A Good Investment?
Louisiana-Pacific Corporation has not done too badly by shareholders, with a total return of 7.8%, over three years. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.
Brad Southern is paid around what is normal for the leaders of comparable size companies.
We’re not seeing great strides in earnings per share, and total returns were decent but not amazing in the last three years. We’re not saying the CEO pay is too generous, but we’d venture the company should look to improve its business metrics (and share price) before paying any more. Shifting gears from CEO pay for a second, we’ve picked out 5 warning signs for Louisiana-Pacific 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.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.
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. Thank you for reading.