Most Shareholders Will Probably Agree With Dropbox, Inc.'s (NASDAQ:DBX) CEO Compensation

Key Insights

• Dropbox's Annual General Meeting to take place on 16th of May
• Total pay for CEO Drew Houston includes US$625.0k salary
• Total compensation is 83% below industry average
• Dropbox's three-year loss to shareholders was 5.3% while its EPS grew by 81% over the past three years

Shareholders may be wondering what CEO Drew Houston plans to do to improve the less than great performance at Dropbox, Inc. (NASDAQ:DBX) recently. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 16th of May. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. We think CEO compensation looks appropriate given the data we have put together.

Check out our latest analysis for Dropbox

Comparing Dropbox, Inc.'s CEO Compensation With The Industry

Our data indicates that Dropbox, Inc. has a market capitalization of US$7.9b, and total annual CEO compensation was reported as US$1.5m for the year to December 2023. We note that's an increase of 34% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$625k.

On examining similar-sized companies in the American Software industry with market capitalizations between US$4.0b and US$12b, we discovered that the median CEO total compensation of that group was US$9.3m. Accordingly, Dropbox pays its CEO under the industry median. Moreover, Drew Houston also holds US$2.0b worth of Dropbox stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	US$625k	US$625k	41%
Other	US$915k	US$521k	59%
Total Compensation	US$1.5m	US$1.1m	100%

Speaking on an industry level, nearly 15% of total compensation represents salary, while the remainder of 85% is other remuneration. It's interesting to note that Dropbox pays out a greater portion of remuneration through salary, compared to the industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Dropbox, Inc.'s Growth

Over the past three years, Dropbox, Inc. has seen its earnings per share (EPS) grow by 81% per year. It achieved revenue growth of 7.6% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Dropbox, Inc. Been A Good Investment?

With a three year total loss of 5.3% for the shareholders, Dropbox, Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Despite the strong EPS growth recently, the share price has not performed to expectations and it suggests that other factors might be driving it, apart from fundamentals. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board and assess if the board's plan is likely to improve company performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 3 warning signs for Dropbox you should be aware of, and 1 of them is potentially serious.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.