Shareholders May Be Wary Of Increasing AdvanSix Inc.'s (NYSE:ASIX) CEO Compensation Package

By
Simply Wall St
Published
June 03, 2021
NYSE:ASIX
Source: Shutterstock

AdvanSix Inc. (NYSE:ASIX) has not performed well recently and CEO Erin Kane will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 10 June 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. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Check out our latest analysis for AdvanSix

How Does Total Compensation For Erin Kane Compare With Other Companies In The Industry?

According to our data, AdvanSix Inc. has a market capitalization of US$910m, and paid its CEO total annual compensation worth US$4.4m over the year to December 2020. Notably, that's an increase of 14% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$862k.

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$4.2m. So it looks like AdvanSix compensates Erin Kane in line with the median for the industry. Moreover, Erin Kane also holds US$8.2m worth of AdvanSix stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20202019Proportion (2020)
Salary US$862k US$774k 20%
Other US$3.5m US$3.1m 80%
Total CompensationUS$4.4m US$3.8m100%

On an industry level, around 17% of total compensation represents salary and 83% is other remuneration. AdvanSix pays out 20% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
NYSE:ASIX CEO Compensation June 3rd 2021

AdvanSix Inc.'s Growth

Over the last three years, AdvanSix Inc. has shrunk its earnings per share by 18% per year. It saw its revenue drop 4.2% over the last year.

The decline in EPS is a bit concerning. 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. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has AdvanSix Inc. Been A Good Investment?

With a three year total loss of 18% for the shareholders, AdvanSix Inc. would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

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, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

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

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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