Vic Grizzle became the CEO of Armstrong World Industries, Inc. (NYSE:AWI) in 2016, 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.
Comparing Armstrong World Industries, Inc.’s CEO Compensation With the industry
According to our data, Armstrong World Industries, Inc. has a market capitalization of US$3.4b, and paid its CEO total annual compensation worth US$5.1m over the year to December 2019. Notably, that’s an increase of 8.0% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$788k.
For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$5.0m. This suggests that Armstrong World Industries remunerates its CEO largely in line with the industry average. What’s more, Vic Grizzle holds US$19m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Talking in terms of the industry, salary represented approximately 18% of total compensation out of all the companies we analyzed, while other remuneration made up 82% of the pie. It’s interesting to note that Armstrong World Industries allocates a smaller portion of compensation to salary in comparison to the broader industry. It’s important to note that a slant towards non-salary compensation suggests that total pay is tied to the company’s performance.
A Look at Armstrong World Industries, Inc.’s Growth Numbers
Over the last three years, Armstrong World Industries, Inc. has shrunk its earnings per share by 22% per year. It saw its revenue drop 3.7% over the last year.
Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company’s future earnings..
Has Armstrong World Industries, Inc. Been A Good Investment?
We think that the total shareholder return of 46%, over three years, would leave most Armstrong World Industries, Inc. shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
As we noted earlier, Armstrong World Industries pays its CEO in line with similar-sized companies belonging to the same industry. Some investors may take issue with this, especially considering shrinking EPS for the past three years. On the flip side, shareholder returns have been strong over the same time, which is certainly a positive sign. We do not think CEO compensation is a problem, but shareholders will probably want to see an increase in EPS before agreeing the business should pay any more.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 1 warning sign for Armstrong World Industries that investors should look into moving forward.
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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