We Discuss Why HealthStream, Inc.'s (NASDAQ:HSTM) CEO Will Find It Hard To Get A Pay Rise From Shareholders This Year

Performance at HealthStream, Inc. (NASDAQ:HSTM) has not been particularly rosy recently and shareholders will likely be holding CEO Bobby Frist and the board accountable for this. The next AGM coming up on 20 May 2021 will be a chance for shareholders to have their concerns addressed by the board, challenge management on company strategy and vote on resolutions such as executive remuneration, which may help change the company's future prospects. The data we gathered below shows that CEO compensation looks acceptable for now.

Check out our latest analysis for HealthStream

How Does Total Compensation For Bobby Frist Compare With Other Companies In The Industry?

Our data indicates that HealthStream, Inc. has a market capitalization of US$825m, and total annual CEO compensation was reported as US$577k for the year to December 2020. That's a slight decrease of 6.5% on the prior year. In particular, the salary of US$345.1k, makes up a fairly large portion of the total compensation being paid to the CEO.

On examining similar-sized companies in the industry with market capitalizations between US$400m and US$1.6b, we discovered that the median CEO total compensation of that group was US$3.2m. Accordingly, HealthStream pays its CEO under the industry median. Moreover, Bobby Frist also holds US$145m worth of HealthStream 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$345k	US$342k	60%
Other	US$232k	US$275k	40%
Total Compensation	US$577k	US$617k	100%

On an industry level, around 14% of total compensation represents salary and 86% is other remuneration. HealthStream pays out 60% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at HealthStream, Inc.'s Growth Numbers

Over the last three years, HealthStream, Inc. has shrunk its earnings per share by 4.6% per year. In the last year, its revenue is down 1.5%.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. 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 HealthStream, Inc. Been A Good Investment?

Since shareholders would have lost about 4.6% over three years, some HealthStream, Inc. investors would surely be feeling negative emotions. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

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. We identified 3 warning signs for HealthStream (1 is potentially serious!) that you should be aware of before investing here.

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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