We Discuss Why Ambac Financial Group, Inc.'s (NYSE:AMBC) CEO Compensation May Be Closely Reviewed

By
Simply Wall St
Published
May 18, 2021
NYSE:AMBC
Source: Shutterstock

The results at Ambac Financial Group, Inc. (NYSE:AMBC) have been quite disappointing recently and CEO Claude LeBlanc bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 25 May 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. From our analysis, we think CEO compensation may need a review in light of the recent performance.

See our latest analysis for Ambac Financial Group

Comparing Ambac Financial Group, Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Ambac Financial Group, Inc. has a market capitalization of US$663m, and reported total annual CEO compensation of US$6.0m for the year to December 2020. That's a modest increase of 7.6% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$900k.

For comparison, other companies in the same industry with market capitalizations ranging between US$400m and US$1.6b had a median total CEO compensation of US$2.9m. This suggests that Claude LeBlanc is paid more than the median for the industry. Moreover, Claude LeBlanc also holds US$4.3m worth of Ambac Financial Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20202019Proportion (2020)
Salary US$900k US$900k 15%
Other US$5.1m US$4.7m 85%
Total CompensationUS$6.0m US$5.6m100%

Speaking on an industry level, nearly 18% of total compensation represents salary, while the remainder of 82% is other remuneration. It's interesting to note that Ambac Financial Group allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
NYSE:AMBC CEO Compensation May 19th 2021

Ambac Financial Group, Inc.'s Growth

Over the last three years, Ambac Financial Group, Inc. has shrunk its earnings per share by 80% per year. In the last year, its revenue is down 11%.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Ambac Financial Group, Inc. Been A Good Investment?

Since shareholders would have lost about 25% over three years, some Ambac Financial Group, Inc. investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 2 warning signs (and 1 which doesn't sit too well with us) in Ambac Financial Group we think you should know about.

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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