Here's Why Shareholders May Want To Be Cautious With Increasing Ocwen Financial Corporation's (NYSE:OCN) CEO Pay Packet

Shareholders of Ocwen Financial Corporation (NYSE:OCN) will have been dismayed by the negative share price return over the last three years. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. The AGM coming up on the 25 May 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Ocwen Financial

How Does Total Compensation For Glen Messina Compare With Other Companies In The Industry?

Our data indicates that Ocwen Financial Corporation has a market capitalization of US$284m, and total annual CEO compensation was reported as US$4.6m for the year to December 2020. That's a notable decrease of 39% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$900k.

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$811k. Accordingly, our analysis reveals that Ocwen Financial Corporation pays Glen Messina north of the industry median. Furthermore, Glen Messina directly owns US$2.3m worth of shares in the company.

Component	2020	2019	Proportion (2020)
Salary	US$900k	US$900k	20%
Other	US$3.7m	US$6.7m	80%
Total Compensation	US$4.6m	US$7.6m	100%

On an industry level, total compensation is equally proportioned between salary and other compensation, that is, they each represent approximately 50% of the total compensation. Ocwen Financial sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Ocwen Financial Corporation's Growth Numbers

Ocwen Financial Corporation's earnings per share (EPS) grew 32% per year over the last three years. Its revenue is down 15% over the previous year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. While it would be good to see revenue growth, profits matter more in the end. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Ocwen Financial Corporation Been A Good Investment?

Few Ocwen Financial Corporation shareholders would feel satisfied with the return of -53% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

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 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 can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Ocwen Financial that investors should think about before committing capital to this stock.

Important note: Ocwen Financial is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

If you decide to trade Ocwen Financial, 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.