Stock Analysis

Increases to Vornado Realty Trust's (NYSE:VNO) CEO Compensation Might Cool off for now

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Shareholders of Vornado Realty Trust (NYSE:VNO) will have been dismayed by the negative share price return over the last three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 20 May 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

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How Does Total Compensation For Steve Roth Compare With Other Companies In The Industry?

Our data indicates that Vornado Realty Trust has a market capitalization of US$9.1b, and total annual CEO compensation was reported as US$11m for the year to December 2020. We note that's a small decrease of 3.7% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$544k.

For comparison, other companies in the same industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$6.6m. Accordingly, our analysis reveals that Vornado Realty Trust pays Steve Roth north of the industry median. Furthermore, Steve Roth directly owns US$173m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20202019Proportion (2020)
Salary US$544k US$880k 5%
Other US$11m US$11m 95%
Total CompensationUS$11m US$11m100%

On an industry level, roughly 15% of total compensation represents salary and 85% is other remuneration. A high-salary is usually a no-brainer when it comes to attracting the best executives, but Vornado Realty Trust paid Steve Roth a nominal salary to the CEO over the past 12 months, instead focusing on non-salary compensation. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

NYSE:VNO CEO Compensation May 14th 2021

Vornado Realty Trust's Growth

Vornado Realty Trust has seen its funds from operations (FFO) increase by 4.6% per year over the past three years. Its revenue is down 19% over the previous year.

We would argue that the lack of revenue growth in the last year is less than ideal, but the modest FFO growth gives us some relief. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. 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 Vornado Realty Trust Been A Good Investment?

With a three year total loss of 20% for the shareholders, Vornado Realty Trust would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Vornado Realty Trust prefers rewarding its CEO through non-salary benefits. The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 2 warning signs for Vornado Realty Trust (of which 1 shouldn't be ignored!) 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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