We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Orrstown Financial Services, Inc.'s (NASDAQ:ORRF) CEO For Now

In the past three years, the share price of Orrstown Financial Services, Inc. (NASDAQ:ORRF) has struggled to generate growth for its shareholders. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. These are some of the concerns that shareholders may want to bring up at the next AGM held on 27 April 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for Orrstown Financial Services

How Does Total Compensation For Tom Quinn Compare With Other Companies In The Industry?

According to our data, Orrstown Financial Services, Inc. has a market capitalization of US$242m, and paid its CEO total annual compensation worth US$1.7m over the year to December 2020. We note that's an increase of 34% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$535k.

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$772k. Accordingly, our analysis reveals that Orrstown Financial Services, Inc. pays Tom Quinn north of the industry median. Moreover, Tom Quinn also holds US$1.4m worth of Orrstown Financial Services stock directly under their own name.

Component	2020	2019	Proportion (2020)
Salary	US$535k	US$530k	31%
Other	US$1.2m	US$772k	69%
Total Compensation	US$1.7m	US$1.3m	100%

Speaking on an industry level, nearly 42% of total compensation represents salary, while the remainder of 58% is other remuneration. In Orrstown Financial Services' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Orrstown Financial Services, Inc.'s Growth

Over the past three years, Orrstown Financial Services, Inc. has seen its earnings per share (EPS) grow by 34% per year. In the last year, its revenue is up 9.0%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. 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 Orrstown Financial Services, Inc. Been A Good Investment?

Since shareholders would have lost about 10% over three years, some Orrstown Financial Services, Inc. investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

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. In our study, we found 2 warning signs for Orrstown Financial Services you should be aware of, and 1 of them is significant.

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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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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