How Much Did Capital Southwest's (NASDAQ:CSWC) CEO Pocket Last Year?

Bowen Diehl has been the CEO of Capital Southwest Corporation (NASDAQ:CSWC) since 2015, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Capital Southwest pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for Capital Southwest

Comparing Capital Southwest Corporation's CEO Compensation With the industry

At the time of writing, our data shows that Capital Southwest Corporation has a market capitalization of US$351m, and reported total annual CEO compensation of US$1.7m for the year to March 2020. That's a notable decrease of 29% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$454k.

On examining similar-sized companies in the industry with market capitalizations between US$200m and US$800m, we discovered that the median CEO total compensation of that group was US$2.5m. This suggests that Bowen Diehl is paid below the industry median. Moreover, Bowen Diehl also holds US$8.8m worth of Capital Southwest stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, around 14% of total compensation represents salary and 86% is other remuneration. It's interesting to note that Capital Southwest pays out a greater portion of remuneration through salary, compared to the industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Capital Southwest Corporation's Growth

Over the last three years, Capital Southwest Corporation has shrunk its earnings per share by 24% per year. It achieved revenue growth of 7.5% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Capital Southwest Corporation Been A Good Investment?

We think that the total shareholder return of 71%, over three years, would leave most Capital Southwest Corporation shareholders smiling. 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...

As we touched on above, Capital Southwest Corporation is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. And although the company is suffering from declining EPS growth over the past three years, shareholder returns remain strong. We would like to see EPS growth, but in our view CEO compensation is modest.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 5 warning signs for Capital Southwest (of which 2 are concerning!) that you should know about in order to have a holistic understanding of the stock.

Important note: Capital Southwest 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.

If you decide to trade Capital Southwest, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.