We Discuss Why Enphase Energy, Inc.'s (NASDAQ:ENPH) CEO Compensation May Be Closely Reviewed

Key Insights

• Enphase Energy to hold its Annual General Meeting on 14th of May
• CEO Badri Kothandaraman's total compensation includes salary of US$450.0k
• Total compensation is 42% above industry average
• Over the past three years, Enphase Energy's EPS fell by 2.7% and over the past three years, the total loss to shareholders 71%

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The results at Enphase Energy, Inc. (NASDAQ:ENPH) have been quite disappointing recently and CEO Badri Kothandaraman bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 14th of May. 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.

View our latest analysis for Enphase Energy

Comparing Enphase Energy, Inc.'s CEO Compensation With The Industry

At the time of writing, our data shows that Enphase Energy, Inc. has a market capitalization of US$5.8b, and reported total annual CEO compensation of US$13m for the year to December 2024. Notably, that's a decrease of 35% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$450k.

In comparison with other companies in the American Semiconductor industry with market capitalizations ranging from US$4.0b to US$12b, the reported median CEO total compensation was US$8.9m. This suggests that Badri Kothandaraman is paid more than the median for the industry. Furthermore, Badri Kothandaraman directly owns US$71m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 13% of total compensation out of all the companies we analyzed, while other remuneration made up 87% of the pie. Enphase Energy has chosen to walk a path less trodden, opting to compensate its CEO with less of a traditional salary and more non-salary rewards over the last year. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Enphase Energy, Inc.'s Growth

Enphase Energy, Inc. has reduced its earnings per share by 2.7% a year over the last three years. In the last year, its revenue is down 22%.

Its a bit disappointing to see that the company has failed to grow its EPS. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Enphase Energy, Inc. Been A Good Investment?

Few Enphase Energy, Inc. shareholders would feel satisfied with the return of -71% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Enphase Energy primarily uses non-salary benefits to reward its CEO. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for Enphase Energy that investors should think about before committing capital to this stock.

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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.