LivaNova PLC's (NASDAQ:LIVN) CEO Might Not Expect Shareholders To Be So Generous This Year

The results at LivaNova PLC (NASDAQ:LIVN) have been quite disappointing recently and CEO Damien McDonald bears some responsibility for this. At the upcoming AGM on 09 June 2021, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for LivaNova

Comparing LivaNova PLC's CEO Compensation With the industry

Our data indicates that LivaNova PLC has a market capitalization of US$3.9b, and total annual CEO compensation was reported as US$6.9m for the year to December 2020. That's a slight decrease of 3.2% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$974k.

In comparison with other companies in the industry with market capitalizations ranging from US$2.0b to US$6.4b, the reported median CEO total compensation was US$5.5m. This suggests that LivaNova remunerates its CEO largely in line with the industry average. What's more, Damien McDonald holds US$6.2m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, around 22% of total compensation represents salary and 78% is other remuneration. It's interesting to note that LivaNova allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

LivaNova PLC's Growth

Over the last three years, LivaNova PLC has shrunk its earnings per share by 63% per year. In the last year, its revenue is down 13%.

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. 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 LivaNova PLC Been A Good Investment?

With a three year total loss of 17% for the shareholders, LivaNova PLC would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

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, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for LivaNova that investors should be aware of in a dynamic business environment.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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