Shareholders will probably not be too impressed with the underwhelming results at Kraton Corporation (NYSE:KRA) recently. At the upcoming AGM on 19 May 2021, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. The data we present below explains why we think CEO compensation is not consistent with recent performance.
Comparing Kraton Corporation's CEO Compensation With the industry
Our data indicates that Kraton Corporation has a market capitalization of US$1.1b, and total annual CEO compensation was reported as US$5.7m for the year to December 2020. That's a modest increase of 5.2% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.0m.
On comparing similar companies from the same industry with market caps ranging from US$400m to US$1.6b, we found that the median CEO total compensation was US$4.1m. Hence, we can conclude that Kevin Fogarty is remunerated higher than the industry median. What's more, Kevin Fogarty holds US$11m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 17% of total compensation represents salary and 83% is other remuneration. Although there is a difference in how total compensation is set, Kraton more or less reflects the market in terms of setting the salary. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at Kraton Corporation's Growth Numbers
Over the last three years, Kraton Corporation has shrunk its earnings per share by 76% per year. Its revenue is down 11% over the previous year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Kraton Corporation Been A Good Investment?
Since shareholders would have lost about 29% over three years, some Kraton Corporation investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
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.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 3 warning signs for Kraton (of which 2 are a bit concerning!) that you should know about in order to have a holistic understanding of the stock.
Switching gears from Kraton, 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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