We Think Some Shareholders May Hesitate To Increase Gritstone bio, Inc.'s (NASDAQ:GRTS) CEO Compensation

Key Insights

• Gritstone bio's Annual General Meeting to take place on 17th of June
• CEO Andrew Allen's total compensation includes salary of US$645.8k
• Total compensation is 205% above industry average
• Over the past three years, Gritstone bio's EPS grew by 0.8% and over the past three years, the total loss to shareholders 92%

The underwhelming share price performance of Gritstone bio, Inc. (NASDAQ:GRTS) in the past three years would have disappointed many shareholders. 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 17th of June could be an opportunity for shareholders to bring these concerns to the board's attention. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Gritstone bio

How Does Total Compensation For Andrew Allen Compare With Other Companies In The Industry?

Our data indicates that Gritstone bio, Inc. has a market capitalization of US$80m, and total annual CEO compensation was reported as US$3.4m for the year to December 2023. Notably, that's an increase of 20% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$646k.

On comparing similar-sized companies in the American Biotechs industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$1.1m. Accordingly, our analysis reveals that Gritstone bio, Inc. pays Andrew Allen north of the industry median. Furthermore, Andrew Allen directly owns US$1.3m worth of shares in the company.

Component	2023	2022	Proportion (2023)
Salary	US$646k	US$620k	19%
Other	US$2.8m	US$2.2m	81%
Total Compensation	US$3.4m	US$2.9m	100%

On an industry level, around 23% of total compensation represents salary and 77% is other remuneration. Gritstone bio sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Gritstone bio, Inc.'s Growth

Earnings per share at Gritstone bio, Inc. are much the same as they were three years ago, albeit with slightly higher. In the last year, its revenue is up 2.9%.

We'd prefer higher revenue growth, but the modest improvement in EPS is good. So there are some positives here, but not enough to earn high praise. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Gritstone bio, Inc. Been A Good Investment?

The return of -92% over three years would not have pleased Gritstone bio, Inc. shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. 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 pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 6 warning signs for Gritstone bio you should be aware of, and 2 of them don't sit too well with us.

Important note: Gritstone bio is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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.