We Think Cara Therapeutics, Inc.'s (NASDAQ:CARA) CEO Compensation Package Needs To Be Put Under A Microscope

Key Insights

• Cara Therapeutics to hold its Annual General Meeting on 4th of June
• CEO Chris Posner's total compensation includes salary of US$728.0k
• The overall pay is 240% above the industry average
• Cara Therapeutics' three-year loss to shareholders was 95% while its EPS was down 57% over the past three years

The results at Cara Therapeutics, Inc. (NASDAQ:CARA) have been quite disappointing recently and CEO Chris Posner bears some responsibility for this. At the upcoming AGM on 4th of June, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Cara Therapeutics

Comparing Cara Therapeutics, Inc.'s CEO Compensation With The Industry

At the time of writing, our data shows that Cara Therapeutics, Inc. has a market capitalization of US$37m, and reported total annual CEO compensation of US$2.9m for the year to December 2023. Notably, that's an increase of 16% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$728k.

For comparison, other companies in the American Pharmaceuticals industry with market capitalizations below US$200m, reported a median total CEO compensation of US$861k. Accordingly, our analysis reveals that Cara Therapeutics, Inc. pays Chris Posner north of the industry median. What's more, Chris Posner holds US$74k worth of shares in the company in their own name.

Component	2023	2022	Proportion (2023)
Salary	US$728k	US$700k	25%
Other	US$2.2m	US$1.8m	75%
Total Compensation	US$2.9m	US$2.5m	100%

On an industry level, around 29% of total compensation represents salary and 71% is other remuneration. Cara Therapeutics pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Cara Therapeutics, Inc.'s Growth

Over the last three years, Cara Therapeutics, Inc. has shrunk its earnings per share by 57% per year. In the last year, its revenue is down 61%.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Cara Therapeutics, Inc. Been A Good Investment?

Few Cara Therapeutics, Inc. shareholders would feel satisfied with the return of -95% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. 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 a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 4 warning signs for Cara Therapeutics 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.