Shareholders May Not Be So Generous With Jounce Therapeutics, Inc.'s (NASDAQ:JNCE) CEO Compensation And Here's Why

As many shareholders of Jounce Therapeutics, Inc. (NASDAQ:JNCE) will be aware, they have not made a gain on their investment in the past three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 18 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.

View our latest analysis for Jounce Therapeutics

How Does Total Compensation For Rich Murray Compare With Other Companies In The Industry?

At the time of writing, our data shows that Jounce Therapeutics, Inc. has a market capitalization of US$362m, and reported total annual CEO compensation of US$2.0m for the year to December 2020. We note that's an increase of 36% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$565k.

For comparison, other companies in the same industry with market capitalizations ranging between US$200m and US$800m had a median total CEO compensation of US$2.3m. From this we gather that Rich Murray is paid around the median for CEOs in the industry. Moreover, Rich Murray also holds US$647k worth of Jounce Therapeutics stock directly under their own name.

Talking in terms of the industry, salary represented approximately 20% of total compensation out of all the companies we analyzed, while other remuneration made up 80% of the pie. Jounce Therapeutics pays out 28% of remuneration in the form of a salary, significantly higher than the industry average. 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 Jounce Therapeutics, Inc.'s Growth Numbers

Jounce Therapeutics, Inc. has seen its earnings per share (EPS) increase by 1.4% a year over the past three years. In the last year, its revenue is down 53%.

We would prefer it if there was revenue growth, but the modest improvement in EPS is good. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Jounce Therapeutics, Inc. Been A Good Investment?

Since shareholders would have lost about 11% over three years, some Jounce Therapeutics, Inc. investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. 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.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 3 warning signs for Jounce Therapeutics (of which 1 is a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Jounce Therapeutics 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. 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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