Should Shareholders Reconsider Nihon House Holdings Co., Ltd.'s (TSE:1873) CEO Compensation Package?

Key Insights

• Nihon House Holdings' Annual General Meeting to take place on 25th of July
• CEO Kazuyuki Narita's total compensation includes salary of JP¥96.0m
• The overall pay is 882% above the industry average
• Over the past three years, Nihon House Holdings' EPS fell by 7.5% and over the past three years, the total loss to shareholders 0.6%

Shareholders will probably not be too impressed with the underwhelming results at Nihon House Holdings Co., Ltd. (TSE:1873) recently. At the upcoming AGM on 25th of July, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for Nihon House Holdings

How Does Total Compensation For Kazuyuki Narita Compare With Other Companies In The Industry?

At the time of writing, our data shows that Nihon House Holdings Co., Ltd. has a market capitalization of JP¥14b, and reported total annual CEO compensation of JP¥134m for the year to October 2023. This was the same amount the CEO received in the prior year. We note that the salary portion, which stands at JP¥96.0m constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the Japanese Consumer Durables industry with market capitalizations under JP¥31b, the reported median total CEO compensation was JP¥14m. Hence, we can conclude that Kazuyuki Narita is remunerated higher than the industry median. Furthermore, Kazuyuki Narita directly owns JP¥282m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2021	Proportion (2023)
Salary	JP¥96m	JP¥95m	72%
Other	JP¥38m	JP¥39m	28%
Total Compensation	JP¥134m	JP¥134m	100%

On an industry level, around 52% of total compensation represents salary and 48% is other remuneration. Nihon House Holdings is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Nihon House Holdings Co., Ltd.'s Growth

Over the last three years, Nihon House Holdings Co., Ltd. has shrunk its earnings per share by 7.5% per year. It saw its revenue drop 4.3% 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. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Nihon House Holdings Co., Ltd. Been A Good Investment?

With a three year total loss of 0.6% for the shareholders, Nihon House Holdings Co., Ltd. would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 3 warning signs for Nihon House Holdings (of which 1 is a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Nihon House Holdings, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com