The results at SL Green Realty Corp. (NYSE:SLG) have been quite disappointing recently and CEO Marc Holliday bears some responsibility for this. At the upcoming AGM on 08 June 2021, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.
Comparing SL Green Realty Corp.'s CEO Compensation With the industry
According to our data, SL Green Realty Corp. has a market capitalization of US$6.1b, and paid its CEO total annual compensation worth US$15m over the year to December 2020. Notably, that's a decrease of 28% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.3m.
On examining similar-sized companies in the industry with market capitalizations between US$4.0b and US$12b, we discovered that the median CEO total compensation of that group was US$6.0m. Hence, we can conclude that Marc Holliday is remunerated higher than the industry median. What's more, Marc Holliday holds US$741k worth of shares in the company in their own name.
Speaking on an industry level, nearly 15% of total compensation represents salary, while the remainder of 85% is other remuneration. SL Green Realty pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
SL Green Realty Corp.'s Growth
SL Green Realty Corp. has reduced its funds from operations (FFO) by 7.7% per year over the last three years. Its revenue is down 22% over the previous year.
The decline in FFO is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 SL Green Realty Corp. Been A Good Investment?
With a three year total loss of 3.5% for the shareholders, SL Green Realty Corp. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
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 pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for SL Green Realty (1 is concerning!) that you should be aware of before investing here.
Switching gears from SL Green Realty, 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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