Should Shareholders Reconsider AZZ Inc.'s (NYSE:AZZ) CEO Compensation Package?

By
Simply Wall St
Published
July 07, 2021
NYSE:AZZ
Source: Shutterstock

The results at AZZ Inc. (NYSE:AZZ) have been quite disappointing recently and CEO Tom Ferguson bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 13 July 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for AZZ

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

Our data indicates that AZZ Inc. has a market capitalization of US$1.3b, and total annual CEO compensation was reported as US$3.2m for the year to February 2021. That's slightly lower by 5.5% over the previous year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$746k.

On comparing similar companies from the same industry with market caps ranging from US$1.0b to US$3.2b, we found that the median CEO total compensation was US$3.4m. From this we gather that Tom Ferguson is paid around the median for CEOs in the industry. Moreover, Tom Ferguson also holds US$6.9m worth of AZZ stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20212020Proportion (2021)
Salary US$746k US$746k 23%
Other US$2.5m US$2.7m 77%
Total CompensationUS$3.2m US$3.4m100%

Talking in terms of the industry, salary represented approximately 25% of total compensation out of all the companies we analyzed, while other remuneration made up 75% of the pie. Although there is a difference in how total compensation is set, AZZ more or less reflects the market in terms of setting the salary. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
NYSE:AZZ CEO Compensation July 7th 2021

A Look at AZZ Inc.'s Growth Numbers

AZZ Inc. has reduced its earnings per share by 4.2% a year over the last three years. Its revenue is down 21% over the previous year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has AZZ Inc. Been A Good Investment?

With a three year total loss of 2.0% for the shareholders, AZZ Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. 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.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 1 warning sign for AZZ that investors should look into moving forward.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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