Shareholders May Not Be So Generous With Chegg, Inc.'s (NYSE:CHGG) CEO Compensation And Here's Why

By
Simply Wall St
Published
May 26, 2021
NYSE:CHGG
Source: Shutterstock

Under the guidance of CEO Dan Rosensweig, Chegg, Inc. (NYSE:CHGG) has performed reasonably well recently. As shareholders go into the upcoming AGM on 02 June 2021, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. However, some shareholders may still be hesitant of being overly generous with CEO compensation.

See our latest analysis for Chegg

Comparing Chegg, Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Chegg, Inc. has a market capitalization of US$11b, and reported total annual CEO compensation of US$10m for the year to December 2020. That's a notable increase of 14% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.0m.

For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$6.6m. Accordingly, our analysis reveals that Chegg, Inc. pays Dan Rosensweig north of the industry median. Moreover, Dan Rosensweig also holds US$112m worth of Chegg stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20202019Proportion (2020)
Salary US$1.0m US$1.0m 10%
Other US$9.4m US$8.1m 90%
Total CompensationUS$10m US$9.1m100%

Speaking on an industry level, nearly 16% of total compensation represents salary, while the remainder of 84% is other remuneration. Chegg pays a modest slice of remuneration through salary, as compared 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.

ceo-compensation
NYSE:CHGG CEO Compensation May 27th 2021

Chegg, Inc.'s Growth

Over the last three years, Chegg, Inc. has shrunk its earnings per share by 20% per year. Its revenue is up 60% over the last year.

The decrease in EPS could be a concern for some investors. But on the other hand, revenue growth is strong, suggesting a brighter future. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. 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 Chegg, Inc. Been A Good Investment?

We think that the total shareholder return of 173%, over three years, would leave most Chegg, Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

The overall company performance has been commendable, however there are still areas for improvement. We still think that some shareholders will be hesitant of increasing CEO pay until EPS growth improves, since they are already paid higher than the industry.

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. We did our research and spotted 2 warning signs for Chegg that investors should look into moving forward.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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