Shareholders May Not Be So Generous With National Bankshares, Inc.'s (NASDAQ:NKSH) CEO Compensation And Here's Why

In the past three years, shareholders of National Bankshares, Inc. (NASDAQ:NKSH) have seen a loss on their investment. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 11 May 2021. They could also influence management through voting on resolutions such as executive remuneration. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

See our latest analysis for National Bankshares

Comparing National Bankshares, Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that National Bankshares, Inc. has a market capitalization of US$228m, and reported total annual CEO compensation of US$1.2m for the year to December 2020. That's just a smallish increase of 4.5% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$500k.

For comparison, other companies in the same industry with market capitalizations ranging between US$100m and US$400m had a median total CEO compensation of US$763k. Hence, we can conclude that F. Denardo is remunerated higher than the industry median. What's more, F. Denardo holds US$1.2m worth of shares in the company in their own name.

Component	2020	2019	Proportion (2020)
Salary	US$500k	US$477k	43%
Other	US$666k	US$639k	57%
Total Compensation	US$1.2m	US$1.1m	100%

On an industry level, around 43% of total compensation represents salary and 57% is other remuneration. Although there is a difference in how total compensation is set, National Bankshares more or less reflects the market in terms of setting the salary. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at National Bankshares, Inc.'s Growth Numbers

National Bankshares, Inc.'s earnings per share (EPS) grew 9.7% per year over the last three years. In the last year, its revenue is down 3.0%.

We generally like to see a little revenue growth, but the modest EPS growth gives us some relief. It's hard to reach a conclusion about business performance right now. This may be one to watch. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has National Bankshares, Inc. Been A Good Investment?

With a three year total loss of 13% for the shareholders, National Bankshares, Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for National Bankshares that investors should be aware of in a dynamic business environment.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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