We Think Some Shareholders May Hesitate To Increase Cumberland Pharmaceuticals Inc.'s (NASDAQ:CPIX) CEO Compensation

In the past three years, the share price of Cumberland Pharmaceuticals Inc. (NASDAQ:CPIX) has struggled to grow and now shareholders are sitting on a loss. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. The AGM coming up on the 27 April 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Cumberland Pharmaceuticals

Comparing Cumberland Pharmaceuticals Inc.'s CEO Compensation With the industry

According to our data, Cumberland Pharmaceuticals Inc. has a market capitalization of US$44m, and paid its CEO total annual compensation worth US$1.2m over the year to December 2020. We note that's a decrease of 22% compared to last year. Notably, the salary which is US$589.5k, represents a considerable chunk of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under US$200m, the reported median total CEO compensation was US$737k. This suggests that A. Kazimi is paid more than the median for the industry. Furthermore, A. Kazimi directly owns US$17m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2020	2019	Proportion (2020)
Salary	US$590k	US$567k	51%
Other	US$566k	US$910k	49%
Total Compensation	US$1.2m	US$1.5m	100%

On an industry level, roughly 30% of total compensation represents salary and 70% is other remuneration. Cumberland Pharmaceuticals pays out 51% of remuneration in the form of a salary, significantly higher than the industry average. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Cumberland Pharmaceuticals Inc.'s Growth

Over the past three years, Cumberland Pharmaceuticals Inc. has seen its earnings per share (EPS) grow by 14% per year. It achieved revenue growth of 8.4% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Cumberland Pharmaceuticals Inc. Been A Good Investment?

With a total shareholder return of -55% over three years, Cumberland Pharmaceuticals Inc. shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for Cumberland Pharmaceuticals 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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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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