Howard Schwimmer is the CEO of Rexford Industrial Realty Inc (NYSE:REXR), which has recently grown to a market capitalization of US$2.49b. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. I will break down Schwimmer’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability.
What has been the trend in REXR’s earnings?REXR can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. Over the last year REXR released an earnings of US$42.50m , which is an increase of 65.55% from its prior year’s earnings of US$25.67m. This is a positive indication that REXR has strived to maintain a good track record of profitability in the face of any headwinds. Since earnings are heading towards the right direction, CEO pay should mirror Schwimmer’s hard work. During the same period, Schwimmer’s total compensation rose by 26.79% to US$3.75m. In addition to this, Schwimmer’s pay is also made up of 62.58% non-cash elements, which means that variabilities in REXR’s share price can impact the real level of what the CEO actually takes home at the end of the day.
Is REXR’s CEO overpaid relative to the market?
While one size does not fit all, since remuneration should account for specific factors of the company and market, we can estimate a high-level base line to see if REXR is an outlier. This outcome can help direct shareholders to ask the right question about Schwimmer’s incentive alignment. Typically, a US mid-cap has a value of $5B, creates earnings of $290M and pays its CEO at roughly $5.3M per year. Considering REXR’s size and performance, in terms of market cap and earnings, it seems that Schwimmer is paid in-line with other comparable US CEOs of profitable mid-caps. This may mean that REXR is appropriately compensating its CEO.
You can breathe easy knowing that shareholder funds aren’t being used to overpay REXR’s CEO. However, on the flipside, you should ask whether Schwimmer is appropriately remunerated on the basis of retention. Its important for shareholders to be active in voting governance decisions, as board members are only representatives of investors’ voices. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Governance: To find out more about REXR’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of REXR? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.