Here's Why Shareholders May Want To Be Cautious With Increasing BIO-key International, Inc.'s (NASDAQ:BKYI) CEO Pay Packet

In the past three years, the share price of BIO-key International, Inc. (NASDAQ:BKYI) has struggled to grow and now shareholders are sitting on a loss. 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 18 June 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. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for BIO-key International

Comparing BIO-key International, Inc.'s CEO Compensation With the industry

According to our data, BIO-key International, Inc. has a market capitalization of US$32m, and paid its CEO total annual compensation worth US$349k over the year to December 2020. That's a notable increase of 12% on last year. In particular, the salary of US$275.0k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations under US$200m, the reported median total CEO compensation was US$450k. This suggests that BIO-key International remunerates its CEO largely in line with the industry average. What's more, Mike DePasquale holds US$93k worth of shares in the company in their own name.

Component	2020	2019	Proportion (2020)
Salary	US$275k	US$275k	79%
Other	US$74k	US$36k	21%
Total Compensation	US$349k	US$311k	100%

Talking in terms of the industry, salary represented approximately 11% of total compensation out of all the companies we analyzed, while other remuneration made up 89% of the pie. According to our research, BIO-key International has allocated a higher percentage of pay to salary in comparison to the wider industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at BIO-key International, Inc.'s Growth Numbers

BIO-key International, Inc.'s earnings per share (EPS) grew 12% per year over the last three years. It achieved revenue growth of 88% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. 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 BIO-key International, Inc. Been A Good Investment?

Few BIO-key International, Inc. shareholders would feel satisfied with the return of -79% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 4 warning signs for BIO-key International (of which 1 is a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from BIO-key International, 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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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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