We Think Shareholders Are Less Likely To Approve A Large Pay Rise For KB Home's (NYSE:KBH) CEO For Now

Key Insights

• KB Home will host its Annual General Meeting on 18th of April
• Salary of US$1.15m is part of CEO Jeff Mezger's total remuneration
• Total compensation is 45% above industry average
• Over the past three years, KB Home's EPS grew by 29% and over the past three years, the total shareholder return was 41%

Performance at KB Home (NYSE:KBH) has been reasonably good and CEO Jeff Mezger has done a decent job of steering the company in the right direction. This is something shareholders will keep in mind as they cast their votes on company resolutions such as executive remuneration in the upcoming AGM on 18th of April. However, some shareholders may still be hesitant of being overly generous with CEO compensation.

View our latest analysis for KB Home

Comparing KB Home's CEO Compensation With The Industry

At the time of writing, our data shows that KB Home has a market capitalization of US$4.8b, and reported total annual CEO compensation of US$16m for the year to November 2023. This means that the compensation hasn't changed much from last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.2m.

For comparison, other companies in the American Consumer Durables industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$11m. Accordingly, our analysis reveals that KB Home pays Jeff Mezger north of the industry median. What's more, Jeff Mezger holds US$105m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	US$1.2m	US$1.2m	7%
Other	US$15m	US$15m	93%
Total Compensation	US$16m	US$16m	100%

Speaking on an industry level, nearly 18% of total compensation represents salary, while the remainder of 82% is other remuneration. In KB Home's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

KB Home's Growth

KB Home's earnings per share (EPS) grew 29% per year over the last three years. In the last year, its revenue is down 5.7%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 KB Home Been A Good Investment?

Most shareholders would probably be pleased with KB Home for providing a total return of 41% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

The company's decent performance might have made most shareholders happy, possibly making CEO remuneration the least of the concerns to be discussed in the upcoming AGM. However, any decision to raise CEO pay might be met with some objections from the shareholders given that the CEO is already paid higher than the industry average.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for KB Home that investors should think about before committing capital to this stock.

Switching gears from KB Home, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.