It's Probably Less Likely That Eastman Chemical Company's (NYSE:EMN) CEO Will See A Huge Pay Rise This Year

Key Insights

• Eastman Chemical will host its Annual General Meeting on 2nd of May
• Salary of US$1.36m is part of CEO Mark Costa's total remuneration
• The overall pay is comparable to the industry average
• Eastman Chemical's three-year loss to shareholders was 9.0% while its EPS grew by 29% over the past three years

In the past three years, shareholders of Eastman Chemical Company (NYSE:EMN) have seen a loss on their investment. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 2nd of May. 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.

Check out our latest analysis for Eastman Chemical

Comparing Eastman Chemical Company's CEO Compensation With The Industry

At the time of writing, our data shows that Eastman Chemical Company has a market capitalization of US$11b, and reported total annual CEO compensation of US$18m for the year to December 2023. That's a fairly small increase of 3.1% over the previous year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.4m.

For comparison, other companies in the American Chemicals industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$14m. This suggests that Eastman Chemical remunerates its CEO largely in line with the industry average. What's more, Mark Costa holds US$38m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	US$1.4m	US$1.3m	8%
Other	US$16m	US$16m	92%
Total Compensation	US$18m	US$17m	100%

On an industry level, roughly 19% of total compensation represents salary and 81% is other remuneration. Eastman Chemical pays a modest slice of remuneration through salary, as compared 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.

Eastman Chemical Company's Growth

Eastman Chemical Company's earnings per share (EPS) grew 29% per year over the last three years. In the last year, its revenue is down 13%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Eastman Chemical Company Been A Good Investment?

Given the total shareholder loss of 9.0% over three years, many shareholders in Eastman Chemical Company are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 3 warning signs for Eastman Chemical 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.