The results at Martinrea International Inc. (TSE:MRE) have been quite disappointing recently and CEO Pat D'Eramo bears some responsibility for this. At the upcoming AGM on 08 June 2021, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. From our analysis, we think CEO compensation may need a review in light of the recent performance.
Comparing Martinrea International Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that Martinrea International Inc. has a market capitalization of CA$1.1b, and reported total annual CEO compensation of CA$3.1m for the year to December 2020. Notably, that's a decrease of 33% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$716k.
For comparison, other companies in the same industry with market capitalizations ranging between CA$481m and CA$1.9b had a median total CEO compensation of CA$3.4m. So it looks like Martinrea International compensates Pat D'Eramo in line with the median for the industry. Furthermore, Pat D'Eramo directly owns CA$2.7m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 41% of total compensation represents salary and 59% is other remuneration. Martinrea International 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.
A Look at Martinrea International Inc.'s Growth Numbers
Martinrea International Inc. has reduced its earnings per share by 62% a year over the last three years. It saw its revenue drop 5.7% over the last year.
Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. 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 Martinrea International Inc. Been A Good Investment?
Given the total shareholder loss of 6.2% over three years, many shareholders in Martinrea International Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.
CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for Martinrea International that investors should be aware of in a dynamic business environment.
Important note: Martinrea International is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.