Here's Why Shareholders May Want To Be Cautious With Increasing Clovis Oncology, Inc.'s (NASDAQ:CLVS) CEO Pay Packet

Shareholders of Clovis Oncology, Inc. (NASDAQ:CLVS) 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. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 23 June 2021. 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 Clovis Oncology

How Does Total Compensation For Patrick Mahaffy Compare With Other Companies In The Industry?

Our data indicates that Clovis Oncology, Inc. has a market capitalization of US$618m, and total annual CEO compensation was reported as US$3.2m for the year to December 2020. Notably, that's a decrease of 53% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$721k.

In comparison with other companies in the industry with market capitalizations ranging from US$400m to US$1.6b, the reported median CEO total compensation was US$3.2m. From this we gather that Patrick Mahaffy is paid around the median for CEOs in the industry. Furthermore, Patrick Mahaffy directly owns US$5.7m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	US$721k	US$719k	22%
Other	US$2.5m	US$6.2m	78%
Total Compensation	US$3.2m	US$6.9m	100%

Speaking on an industry level, nearly 20% of total compensation represents salary, while the remainder of 80% is other remuneration. Clovis Oncology pays out 22% 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.

Clovis Oncology, Inc.'s Growth

Clovis Oncology, Inc.'s earnings per share (EPS) grew 14% per year over the last three years. In the last year, its revenue is up 5.0%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Clovis Oncology, Inc. Been A Good Investment?

Few Clovis Oncology, Inc. shareholders would feel satisfied with the return of -88% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. 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. 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.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 5 warning signs for Clovis Oncology (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.

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. 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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