What Can We Conclude About Lincoln Electric Holdings’ (NASDAQ:LECO) CEO Pay?

Chris Mapes became the CEO of Lincoln Electric Holdings, Inc. (NASDAQ:LECO) 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.

See our latest analysis for Lincoln Electric Holdings

How Does Total Compensation For Chris Mapes Compare With Other Companies In The Industry?

At the time of writing, our data shows that Lincoln Electric Holdings, Inc. has a market capitalization of US$5.6b, and reported total annual CEO compensation of US$7.0m for the year to December 2019. This means that the compensation hasn’t changed much from last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.0m.

For comparison, other companies in the same industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$6.7m. From this we gather that Chris Mapes is paid around the median for CEOs in the industry. What’s more, Chris Mapes holds US$22m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20192018Proportion (2019)
Salary US$1.0m US$965k 14%
Other US$6.0m US$6.1m 86%
Total CompensationUS$7.0m US$7.0m100%

On an industry level, around 16% of total compensation represents salary and 84% is other remuneration. Lincoln Electric Holdings 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.

ceo-compensation
NasdaqGS:LECO CEO Compensation September 8th 2020

Lincoln Electric Holdings, Inc.’s Growth

Over the past three years, Lincoln Electric Holdings, Inc. has seen its earnings per share (EPS) grow by 1.1% per year. It saw its revenue drop 8.5% over the last year.

We would prefer it if there was revenue growth, but the modest EPSgrowth gives us some relief. These two metrics are moving in different directions, so while it’s hard to be confident judging performance, we think the stock is worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company’s future earnings..

Has Lincoln Electric Holdings, Inc. Been A Good Investment?

Lincoln Electric Holdings, Inc. has generated a total shareholder return of 13% over three years, so most shareholders would be reasonably content. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.

In Summary…

As we touched on above, Lincoln Electric Holdings, 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. But the company has failed to produce substantial growth in either EPS or total shareholder return. Considering the steady performance, it’s tough to call out CEO compensation as too high, but shareholders might want to see more robust growth metrics before agreeing to a future raise.

CEO compensation can have a massive impact on performance, but it’s just one element. That’s why we did some digging and identified 2 warning signs for Lincoln Electric Holdings 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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