It's Unlikely That Kingsway Financial Services Inc.'s (NYSE:KFS) CEO Will See A Huge Pay Rise This Year

Despite positive share price growth of 15% for Kingsway Financial Services Inc. (NYSE:KFS) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 28 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. 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 Kingsway Financial Services

How Does Total Compensation For JT Fitzgerald Compare With Other Companies In The Industry?

At the time of writing, our data shows that Kingsway Financial Services Inc. has a market capitalization of US$120m, and reported total annual CEO compensation of US$872k for the year to December 2020. That's a notable increase of 13% on last year. We note that the salary of US$500.0k makes up a sizeable portion of the total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$361k. Accordingly, our analysis reveals that Kingsway Financial Services Inc. pays JT Fitzgerald north of the industry median. Moreover, JT Fitzgerald also holds US$9.9m worth of Kingsway Financial Services 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$500k	US$500k	57%
Other	US$372k	US$274k	43%
Total Compensation	US$872k	US$774k	100%

On an industry level, roughly 18% of total compensation represents salary and 82% is other remuneration. According to our research, Kingsway Financial Services 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.

Kingsway Financial Services Inc.'s Growth

Over the last three years, Kingsway Financial Services Inc. has shrunk its earnings per share by 3.5% per year. It achieved revenue growth of 14% over the last year.

The decline in EPS is a bit concerning. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Kingsway Financial Services Inc. Been A Good Investment?

Kingsway Financial Services Inc. has generated a total shareholder return of 15% over three years, so most shareholders would be reasonably content. 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.

In Summary...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these 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.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 2 warning signs (and 1 which makes us a bit uncomfortable) in Kingsway Financial Services we think you should know about.

Switching gears from Kingsway Financial Services, 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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