We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Tootsie Roll Industries, Inc.'s (NYSE:TR) CEO For Now

The share price of Tootsie Roll Industries, Inc. (NYSE:TR) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 03 May 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

See our latest analysis for Tootsie Roll Industries

How Does Total Compensation For Ellen Gordon Compare With Other Companies In The Industry?

According to our data, Tootsie Roll Industries, Inc. has a market capitalization of US$2.1b, and paid its CEO total annual compensation worth US$4.9m over the year to December 2020. That's a notable decrease of 9.4% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$999k.

In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$2.0m. Accordingly, our analysis reveals that Tootsie Roll Industries, Inc. pays Ellen Gordon north of the industry median. Moreover, Ellen Gordon also holds US$1.5b worth of Tootsie Roll Industries stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	US$999k	US$999k	20%
Other	US$3.9m	US$4.4m	80%
Total Compensation	US$4.9m	US$5.4m	100%

Speaking on an industry level, nearly 30% of total compensation represents salary, while the remainder of 70% is other remuneration. Tootsie Roll Industries pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Tootsie Roll Industries, Inc.'s Growth Numbers

Over the last three years, Tootsie Roll Industries, Inc. has shrunk its earnings per share by 8.9% per year. Its revenue is down 11% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Tootsie Roll Industries, Inc. Been A Good Investment?

Tootsie Roll Industries, Inc. has served shareholders reasonably well, with a total return of 27% over three years. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

To Conclude...

Shareholder returns, while positive, should be looked at along with earnings, which have not grown at all recently. This makes us think the share price momentum may slow in the future. 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.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 2 warning signs for Tootsie Roll Industries (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Tootsie Roll Industries, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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