Stock Analysis

We Think Shareholders May Want To Consider A Review Of The RMR Group Inc.'s (NASDAQ:RMR) CEO Compensation Package

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The RMR Group Inc. (NASDAQ:RMR) has not performed well recently and CEO Adam Portnoy will probably need to up their game. At the upcoming AGM on 10 March 2022, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Check out our latest analysis for RMR Group

Comparing The RMR Group Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that The RMR Group Inc. has a market capitalization of US$932m, and reported total annual CEO compensation of US$4.4m for the year to September 2021. We note that's an increase of 14% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$350k.

On examining similar-sized companies in the industry with market capitalizations between US$400m and US$1.6b, we discovered that the median CEO total compensation of that group was US$2.3m. Hence, we can conclude that Adam Portnoy is remunerated higher than the industry median. Moreover, Adam Portnoy also holds US$5.1m worth of RMR Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20212020Proportion (2021)
Salary US$350k US$350k 8%
Other US$4.1m US$3.5m 92%
Total CompensationUS$4.4m US$3.9m100%

Speaking on an industry level, nearly 29% of total compensation represents salary, while the remainder of 71% is other remuneration. It's interesting to note that RMR Group 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.

NasdaqCM:RMR CEO Compensation March 4th 2022

The RMR Group Inc.'s Growth

Over the last three years, The RMR Group Inc. has shrunk its earnings per share by 39% per year. In the last year, its revenue is up 9.4%.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has The RMR Group Inc. Been A Good Investment?

The return of -40% over three years would not have pleased The RMR Group Inc. shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

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, the board will get the chance to explain the steps it plans to take to improve business performance.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 2 warning signs for RMR Group (1 is potentially serious!) that you should be aware of before investing here.

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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