This article will reflect on the compensation paid to M. Kathwari who has served as CEO of Ethan Allen Interiors Inc. (NYSE:ETH) since 1988. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Ethan Allen Interiors.
How Does Total Compensation For M. Kathwari Compare With Other Companies In The Industry?
According to our data, Ethan Allen Interiors Inc. has a market capitalization of US$508m, and paid its CEO total annual compensation worth US$1.8m over the year to June 2020. Notably, that's a decrease of 35% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$863k.
In comparison with other companies in the industry with market capitalizations ranging from US$200m to US$800m, the reported median CEO total compensation was US$2.0m. From this we gather that M. Kathwari is paid around the median for CEOs in the industry. Moreover, M. Kathwari also holds US$42m worth of Ethan Allen Interiors stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 27% of total compensation out of all the companies we analyzed, while other remuneration made up 73% of the pie. Ethan Allen Interiors is paying a higher share of its remuneration through a salary in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at Ethan Allen Interiors Inc.'s Growth Numbers
Over the last three years, Ethan Allen Interiors Inc. has shrunk its earnings per share by 48% per year. In the last year, its revenue is down 23%.
The decline in EPS is a bit concerning. 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. 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 Ethan Allen Interiors Inc. Been A Good Investment?
Since shareholders would have lost about 16% over three years, some Ethan Allen Interiors Inc. investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.
As we noted earlier, Ethan Allen Interiors pays its CEO in line with similar-sized companies belonging to the same industry. On the other hand, EPS growth and total shareholder return have been negative for the last three years. We'd stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.
CEO compensation can have a massive impact on performance, but it's just one element. We've identified 4 warning signs for Ethan Allen Interiors that investors should be aware of in a dynamic business environment.
Switching gears from Ethan Allen Interiors, 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.
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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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