Increases to Capital Southwest Corporation's (NASDAQ:CSWC) CEO Compensation Might Cool off for now

By
Simply Wall St
Published
July 22, 2021
NasdaqGS:CSWC
Source: Shutterstock

Performance at Capital Southwest Corporation (NASDAQ:CSWC) has been reasonably good and CEO Bowen Diehl 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 28 July 2021. However, some shareholders may still want to keep CEO compensation within reason.

See our latest analysis for Capital Southwest

Comparing Capital Southwest Corporation's CEO Compensation With the industry

According to our data, Capital Southwest Corporation has a market capitalization of US$536m, and paid its CEO total annual compensation worth US$2.6m over the year to March 2021. Notably, that's an increase of 49% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, 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$1.5m. Hence, we can conclude that Bowen Diehl is remunerated higher than the industry median. Moreover, Bowen Diehl also holds US$13m worth of Capital Southwest stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20212020Proportion (2021)
Salary US$454k US$454k 18%
Other US$2.1m US$1.3m 82%
Total CompensationUS$2.6m US$1.7m100%

On an industry level, roughly 13% of total compensation represents salary and 87% is other remuneration. According to our research, Capital Southwest has allocated a higher percentage of pay to salary in comparison to the wider 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
NasdaqGS:CSWC CEO Compensation July 22nd 2021

Capital Southwest Corporation's Growth

Capital Southwest Corporation has seen its earnings per share (EPS) increase by 3.0% a year over the past three years. Its revenue is up 9.7% over the last year.

We're not particularly impressed by the revenue growth, but the modest improvement in EPS is good. It's clear the performance has been quite decent, but it it falls short of outstanding,based on this information. 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 Capital Southwest Corporation Been A Good Investment?

Most shareholders would probably be pleased with Capital Southwest Corporation for providing a total return of 99% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. Still, not all shareholders might be in favor of a pay raise to the CEO, seeing that they are already being paid higher than the industry.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 5 warning signs for Capital Southwest you should be aware of, and 2 of them are a bit concerning.

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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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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