Should Shareholders Reconsider FreightCar America, Inc.'s (NASDAQ:RAIL) CEO Compensation Package?

The results at FreightCar America, Inc. (NASDAQ:RAIL) have been quite disappointing recently and CEO Jim Meyer bears some responsibility for this. At the upcoming AGM on 13 May 2021, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

View our latest analysis for FreightCar America

How Does Total Compensation For Jim Meyer Compare With Other Companies In The Industry?

At the time of writing, our data shows that FreightCar America, Inc. has a market capitalization of US$101m, and reported total annual CEO compensation of US$2.0m for the year to December 2020. We note that's a small decrease of 7.6% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$500k.

In comparison with other companies in the industry with market capitalizations under US$200m, the reported median total CEO compensation was US$594k. This suggests that Jim Meyer is paid more than the median for the industry. What's more, Jim Meyer holds US$1.9m 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$500k	US$500k	25%
Other	US$1.5m	US$1.7m	75%
Total Compensation	US$2.0m	US$2.2m	100%

On an industry level, roughly 19% of total compensation represents salary and 81% is other remuneration. It's interesting to note that FreightCar America pays out a greater portion of remuneration through salary, compared to the industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

FreightCar America, Inc.'s Growth

Over the last three years, FreightCar America, Inc. has shrunk its earnings per share by 39% per year. It saw its revenue drop 53% over the last year.

Overall this is not a very positive result for shareholders. 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. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has FreightCar America, Inc. Been A Good Investment?

Few FreightCar America, Inc. shareholders would feel satisfied with the return of -61% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 4 warning signs (and 1 which is concerning) in FreightCar America we think you should know about.

Important note: FreightCar America 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.

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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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