Stock Analysis

We Discuss Why The RMR Group Inc.'s (NASDAQ:RMR) CEO Compensation May Be Closely Reviewed

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Shareholders will probably not be too impressed with the underwhelming results at The RMR Group Inc. (NASDAQ:RMR) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 11 March 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

View our latest analysis for RMR Group

How Does Total Compensation For Adam Portnoy Compare With Other Companies In The Industry?

At the time of writing, our data shows that The RMR Group Inc. has a market capitalization of US$1.3b, and reported total annual CEO compensation of US$3.9m for the year to September 2020. We note that's a small decrease of 6.2% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$350k.

On comparing similar companies from the same industry with market caps ranging from US$1.0b to US$3.2b, we found that the median CEO total compensation was US$4.8m. This suggests that RMR Group remunerates its CEO largely in line with the industry average. What's more, Adam Portnoy holds US$2.8m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary US$350k US$325k 9%
Other US$3.5m US$3.8m 91%
Total CompensationUS$3.9m US$4.1m100%

Speaking on an industry level, nearly 30% of total compensation represents salary, while the remainder of 70% is other remuneration. In RMR Group's case, non-salary compensation represents a greater slice of total remuneration, 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.

NasdaqCM:RMR CEO Compensation March 5th 2021

A Look at The RMR Group Inc.'s Growth Numbers

Over the last three years, The RMR Group Inc. has shrunk its earnings per share by 32% per year. Its revenue is down 9.0% over the previous year.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 The RMR Group Inc. Been A Good Investment?

With a total shareholder return of -36% over three years, The RMR Group Inc. shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 1 warning sign for RMR Group that investors should look into moving forward.

Important note: RMR Group 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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