Here's Why Equity Commonwealth's (NYSE:EQC) CEO Compensation Is The Least Of Shareholders' Concerns

Despite positive share price growth of 21% for Equity Commonwealth (NYSE:EQC) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 23 June 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

View our latest analysis for Equity Commonwealth

How Does Total Compensation For David Helfand Compare With Other Companies In The Industry?

At the time of writing, our data shows that Equity Commonwealth has a market capitalization of US$3.4b, and reported total annual CEO compensation of US$5.4m for the year to December 2020. That's a notable decrease of 11% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$824k.

On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$5.3m. So it looks like Equity Commonwealth compensates David Helfand in line with the median for the industry. Moreover, David Helfand also holds US$23m worth of Equity Commonwealth stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	US$824k	US$800k	15%
Other	US$4.5m	US$5.2m	85%
Total Compensation	US$5.4m	US$6.0m	100%

On an industry level, roughly 15% of total compensation represents salary and 85% is other remuneration. Our data reveals that Equity Commonwealth allocates salary more or less in line with the wider market. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Equity Commonwealth's Growth Numbers

Equity Commonwealth's funds from operations (FFO) reversed its movement and declined to -US$702k from US$75m last year. Its revenue is down 41% over the previous year.

A lack of improvement is not good to see. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Equity Commonwealth Been A Good Investment?

With a total shareholder return of 21% over three years, Equity Commonwealth shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 3 warning signs for Equity Commonwealth (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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