Here's Why We Think Strattec Security Corporation's (NASDAQ:STRT) CEO Compensation Looks Fair for the time being

Key Insights

• Strattec Security's Annual General Meeting to take place on 10th of October
• CEO Frank Krejci's total compensation includes salary of US$630.6k
• The overall pay is comparable to the industry average
• Strattec Security's total shareholder return over the past three years was 7.3% while its EPS was down 19% over the past three years

Despite positive share price growth of 7.3% for Strattec Security Corporation (NASDAQ:STRT) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 10th of October. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

View our latest analysis for Strattec Security

How Does Total Compensation For Frank Krejci Compare With Other Companies In The Industry?

Our data indicates that Strattec Security Corporation has a market capitalization of US$93m, and total annual CEO compensation was reported as US$803k for the year to July 2023. This means that the compensation hasn't changed much from last year. We note that the salary portion, which stands at US$630.6k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the American Auto Components industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$803k. So it looks like Strattec Security compensates Frank Krejci in line with the median for the industry. Furthermore, Frank Krejci directly owns US$1.8m worth of shares in the company.

Component	2023	2022	Proportion (2023)
Salary	US$631k	US$578k	79%
Other	US$173k	US$232k	21%
Total Compensation	US$803k	US$809k	100%

Speaking on an industry level, nearly 17% of total compensation represents salary, while the remainder of 83% is other remuneration. It's interesting to note that Strattec Security pays out a greater portion of remuneration through salary, compared to the industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Strattec Security Corporation's Growth

Strattec Security Corporation has reduced its earnings per share by 19% a year over the last three years. It achieved revenue growth of 9.0% over the last year.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Strattec Security Corporation Been A Good Investment?

With a total shareholder return of 7.3% over three years, Strattec Security Corporation has done okay by shareholders, but there's always room for improvement. In light of that, investors might probably want to see an improvement on their returns before they feel generous about increasing the CEO remuneration.

In Summary...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 1 warning sign for Strattec Security that investors should be aware of in a dynamic business environment.

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. 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.