Increases to CEO Compensation Might Be Put On Hold For Now at Pharming Group N.V. (AMS:PHARM)

In the past three years, the share price of Pharming Group N.V. (AMS:PHARM) has struggled to grow and now shareholders are sitting on a loss. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 19 May 2021. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Pharming Group

Comparing Pharming Group N.V.'s CEO Compensation With the industry

According to our data, Pharming Group N.V. has a market capitalization of €696m, and paid its CEO total annual compensation worth €2.6m over the year to December 2020. We note that's an increase of 82% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at €538k.

On comparing similar companies from the same industry with market caps ranging from €329m to €1.3b, we found that the median CEO total compensation was €812k. Accordingly, our analysis reveals that Pharming Group N.V. pays Simon de Vries north of the industry median. Moreover, Simon de Vries also holds €12m worth of Pharming Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	€538k	€507k	21%
Other	€2.0m	€901k	79%
Total Compensation	€2.6m	€1.4m	100%

Speaking on an industry level, nearly 57% of total compensation represents salary, while the remainder of 43% is other remuneration. It's interesting to note that Pharming Group allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Pharming Group N.V.'s Growth

Over the past three years, Pharming Group N.V. has seen its earnings per share (EPS) grow by 99% per year. It achieved revenue growth of 9.8% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Pharming Group N.V. Been A Good Investment?

Since shareholders would have lost about 26% over three years, some Pharming Group N.V. investors would surely be feeling negative emotions. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Pharming Group that investors should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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