Here's Why We Think The Wendy's Company's (NASDAQ:WEN) CEO Compensation Looks Fair for the time being

By
Simply Wall St
Published
May 11, 2021
NasdaqGS:WEN
Source: Shutterstock

Despite strong share price growth of 46% for The Wendy's Company (NASDAQ:WEN) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 18 May 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Check out our latest analysis for Wendy's

Comparing The Wendy's Company's CEO Compensation With the industry

According to our data, The Wendy's Company has a market capitalization of US$5.1b, and paid its CEO total annual compensation worth US$7.2m over the year to January 2021. That's a modest increase of 7.8% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.0m.

On comparing similar companies from the same industry with market caps ranging from US$4.0b to US$12b, we found that the median CEO total compensation was US$6.5m. So it looks like Wendy's compensates Todd Penegor in line with the median for the industry. Furthermore, Todd Penegor directly owns US$14m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20212019Proportion (2021)
Salary US$1.0m US$992k 15%
Other US$6.2m US$5.7m 85%
Total CompensationUS$7.2m US$6.7m100%

On an industry level, roughly 22% of total compensation represents salary and 78% is other remuneration. It's interesting to note that Wendy's allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
NasdaqGS:WEN CEO Compensation May 12th 2021

A Look at The Wendy's Company's Growth Numbers

The Wendy's Company has reduced its earnings per share by 13% a year over the last three years. Its revenue is up 2.2% over the last year.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. 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 The Wendy's Company Been A Good Investment?

Boasting a total shareholder return of 46% over three years, The Wendy's Company 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.

In Summary...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for Wendy's (1 doesn't sit too well with us!) that you should be aware of before investing here.

Important note: Wendy's 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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