Should Shareholders Reconsider First Financial Northwest, Inc.'s (NASDAQ:FFNW) CEO Compensation Package?

Shareholders will probably not be too impressed with the underwhelming results at First Financial Northwest, Inc. (NASDAQ:FFNW) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 09 June 2021. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for First Financial Northwest

Comparing First Financial Northwest, Inc.'s CEO Compensation With the industry

According to our data, First Financial Northwest, Inc. has a market capitalization of US$138m, and paid its CEO total annual compensation worth US$945k over the year to December 2020. That's a notable increase of 40% on last year. Notably, the salary which is US$478.4k, represents a considerable chunk of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$567k. This suggests that Joe Kiley is paid more than the median for the industry. Moreover, Joe Kiley also holds US$399k worth of First Financial Northwest stock directly under their own name.

Component	2020	2019	Proportion (2020)
Salary	US$478k	US$464k	51%
Other	US$467k	US$210k	49%
Total Compensation	US$945k	US$674k	100%

On an industry level, roughly 43% of total compensation represents salary and 57% is other remuneration. First Financial Northwest pays out 51% of remuneration in the form of a salary, significantly higher than the industry average. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at First Financial Northwest, Inc.'s Growth Numbers

Over the last three years, First Financial Northwest, Inc. has shrunk its earnings per share by 8.4% per year. Revenue was pretty flat on last year.

The decline in EPS is a bit concerning. And the flat revenue hardly impresses. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has First Financial Northwest, Inc. Been A Good Investment?

Since shareholders would have lost about 22% over three years, some First Financial Northwest, Inc. investors would surely be feeling negative emotions. 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, 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 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. That's why we did some digging and identified 2 warning signs for First Financial Northwest that you should be aware of before investing.

Switching gears from First Financial Northwest, 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. 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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