Should Shareholders Reconsider United Security Bancshares' (NASDAQ:UBFO) CEO Compensation Package?

Shareholders will probably not be too impressed with the underwhelming results at United Security Bancshares (NASDAQ:UBFO) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 20 May 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for United Security Bancshares

Comparing United Security Bancshares' CEO Compensation With the industry

At the time of writing, our data shows that United Security Bancshares has a market capitalization of US$132m, and reported total annual CEO compensation of US$809k for the year to December 2020. We note that's a small decrease of 3.9% on last year. We note that the salary portion, which stands at US$578.9k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$573k. This suggests that Dennis Woods is paid more than the median for the industry. What's more, Dennis Woods holds US$8.6m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	US$579k	US$576k	72%
Other	US$230k	US$266k	28%
Total Compensation	US$809k	US$842k	100%

Talking in terms of the industry, salary represented approximately 42% of total compensation out of all the companies we analyzed, while other remuneration made up 58% of the pie. According to our research, United Security Bancshares has allocated a higher percentage of pay to salary in comparison to the wider industry. 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 United Security Bancshares' Growth Numbers

Over the last three years, United Security Bancshares has shrunk its earnings per share by 8.9% per year. In the last year, its revenue is down 23%.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has United Security Bancshares Been A Good Investment?

Given the total shareholder loss of 19% over three years, many shareholders in United Security Bancshares are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO 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. We've identified 1 warning sign for United Security Bancshares that investors should be aware of in a dynamic business environment.

Switching gears from United Security Bancshares, 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.

If you decide to trade United Security Bancshares, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.