How Should Investors React To Koss' (NASDAQ:KOSS) CEO Pay?

Michael Koss became the CEO of Koss Corporation (NASDAQ:KOSS) in 1991, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Koss pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for Koss

Comparing Koss Corporation's CEO Compensation With the industry

According to our data, Koss Corporation has a market capitalization of US$18m, and paid its CEO total annual compensation worth US$553k over the year to June 2020. We note that's a decrease of 9.2% compared to last year. Notably, the salary which is US$325.0k, represents most of the total compensation being paid.

On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$391k. Accordingly, our analysis reveals that Koss Corporation pays Michael Koss north of the industry median. Furthermore, Michael Koss directly owns US$110k worth of shares in the company.

On an industry level, roughly 27% of total compensation represents salary and 73% is other remuneration. Koss is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Koss Corporation's Growth Numbers

Koss Corporation's earnings per share (EPS) grew 85% per year over the last three years. Its revenue is down 16% over the previous year.

Shareholders would be glad to know that the company has improved itself over the last few 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 Koss Corporation Been A Good Investment?

Boasting a total shareholder return of 60% over three years, Koss Corporation has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

As we noted earlier, Koss pays its CEO higher than the norm for similar-sized companies belonging to the same industry. However, Koss has produced strong EPS growth and shareholder returns over the last three years. So, in acknowledgment of the overall excellent performance, we believe CEO compensation is appropriate. The pleasing shareholder returns are the cherry on top. We wouldn't be wrong in saying that shareholders feel that Michael's performance creates value for the company.

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. We identified 2 warning signs for Koss (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Important note: Koss 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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