Here's Why Shareholders May Want To Be Cautious With Increasing Ashland Inc.'s (NYSE:ASH) CEO Pay Packet

Key Insights

• Ashland will host its Annual General Meeting on 21st of January
• CEO Guillermo Novo's total compensation includes salary of US$1.13m
• The overall pay is 64% above the industry average
• Ashland's EPS grew by 14% over the past three years while total shareholder loss over the past three years was 32%

Shareholders of Ashland Inc. (NYSE:ASH) will have been dismayed by the negative share price return over the last three years. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. The AGM coming up on the 21st of January could be an opportunity for shareholders to bring these concerns to the board's attention. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Ashland

How Does Total Compensation For Guillermo Novo Compare With Other Companies In The Industry?

According to our data, Ashland Inc. has a market capitalization of US$3.3b, and paid its CEO total annual compensation worth US$9.0m over the year to September 2024. That's a notable increase of 29% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.1m.

In comparison with other companies in the American Chemicals industry with market capitalizations ranging from US$2.0b to US$6.4b, the reported median CEO total compensation was US$5.5m. Hence, we can conclude that Guillermo Novo is remunerated higher than the industry median. What's more, Guillermo Novo holds US$8.7m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2024	2023	Proportion (2024)
Salary	US$1.1m	US$1.1m	13%
Other	US$7.9m	US$5.8m	87%
Total Compensation	US$9.0m	US$7.0m	100%

On an industry level, roughly 19% of total compensation represents salary and 81% is other remuneration. In Ashland's case, non-salary compensation represents a greater slice of total remuneration, 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.

A Look at Ashland Inc.'s Growth Numbers

Ashland Inc. has seen its earnings per share (EPS) increase by 14% a year over the past three years. In the last year, its revenue is down 3.6%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 Ashland Inc. Been A Good Investment?

Few Ashland Inc. shareholders would feel satisfied with the return of -32% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 2 warning signs for Ashland that investors should look into moving forward.

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.