This Is Why Revolution Medicines, Inc.'s (NASDAQ:RVMD) CEO Compensation Looks Appropriate

Key Insights

• Revolution Medicines to hold its Annual General Meeting on 20th of June
• Total pay for CEO Mark Goldsmith includes US$631.1k salary
• The overall pay is comparable to the industry average
• Over the past three years, Revolution Medicines' EPS fell by 19% and over the past three years, the total shareholder return was 14%

Despite positive share price growth of 14% for Revolution Medicines, Inc. (NASDAQ:RVMD) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 20th of June may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Revolution Medicines

Comparing Revolution Medicines, Inc.'s CEO Compensation With The Industry

Our data indicates that Revolution Medicines, Inc. has a market capitalization of US$6.6b, and total annual CEO compensation was reported as US$10m for the year to December 2023. Notably, that's an increase of 44% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$631k.

For comparison, other companies in the American Biotechs industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$12m. So it looks like Revolution Medicines compensates Mark Goldsmith in line with the median for the industry. Moreover, Mark Goldsmith also holds US$24m worth of Revolution Medicines stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	US$631k	US$607k	6%
Other	US$9.8m	US$6.6m	94%
Total Compensation	US$10m	US$7.2m	100%

Talking in terms of the industry, salary represented approximately 23% of total compensation out of all the companies we analyzed, while other remuneration made up 77% of the pie. It's interesting to note that Revolution Medicines allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Revolution Medicines, Inc.'s Growth

Over the last three years, Revolution Medicines, Inc. has shrunk its earnings per share by 19% per year. Its revenue is down 87% over the previous year.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Revolution Medicines, Inc. Been A Good Investment?

Revolution Medicines, Inc. has generated a total shareholder return of 14% over three years, so most shareholders would be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

Shareholder returns, while positive, should be looked at along with earnings, which have not grown at all recently. This makes us think the share price momentum may slow in the future. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 3 warning signs (and 1 which is a bit concerning) in Revolution Medicines we think you should know about.

Switching gears from Revolution Medicines, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com