Increases to CEO Compensation Might Be Put On Hold For Now at Medallion Financial Corp. (NASDAQ:MFIN)

The share price of Medallion Financial Corp. (NASDAQ:MFIN) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 17 June 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

View our latest analysis for Medallion Financial

Comparing Medallion Financial Corp.'s CEO Compensation With the industry

At the time of writing, our data shows that Medallion Financial Corp. has a market capitalization of US$225m, and reported total annual CEO compensation of US$1.5m for the year to December 2020. That is, the compensation was roughly the same as last year. In particular, the salary of US$890.7k, makes up a huge portion of the total compensation being paid to the CEO.

On examining similar-sized companies in the industry with market capitalizations between US$100m and US$400m, we discovered that the median CEO total compensation of that group was US$595k. Accordingly, our analysis reveals that Medallion Financial Corp. pays Alvin Murstein north of the industry median. What's more, Alvin Murstein holds US$15m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2020	2019	Proportion (2020)
Salary	US$891k	US$891k	61%
Other	US$580k	US$623k	39%
Total Compensation	US$1.5m	US$1.5m	100%

On an industry level, around 17% of total compensation represents salary and 83% is other remuneration. According to our research, Medallion Financial has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at Medallion Financial Corp.'s Growth Numbers

Over the last three years, Medallion Financial Corp. has shrunk its earnings per share by 5.5% per year. It achieved revenue growth of 10% over the last year.

Few shareholders would be pleased to read that EPS have declined. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Medallion Financial Corp. Been A Good Investment?

Boasting a total shareholder return of 64% over three years, Medallion Financial Corp. 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.

To Conclude...

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. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. In our study, we found 2 warning signs for Medallion Financial you should be aware of, and 1 of them is potentially serious.

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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