Is LivePerson, Inc.'s (NASDAQ:LPSN) CEO Pay Fair?

In 1995, Rob LoCascio was appointed CEO of LivePerson, Inc. (NASDAQ:LPSN). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for LivePerson

How Does Rob LoCascio's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that LivePerson, Inc. has a market cap of US$2.4b, and reported total annual CEO compensation of US$3.8m for the year to December 2019. Notably, that's an increase of 30% over the year before. While we always look at total compensation first, we note that the salary component is less, at US$612k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations from US$2.0b to US$6.4b, and the median CEO total compensation was US$5.9m.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where LivePerson stands. Talking in terms of the sector, salary represented approximately 13% of total compensation out of all the companies we analysed, while other remuneration made up 87% of the pie. LivePerson does not set aside a larger portion of remuneration in the form of salary, maintaining the same rate as the wider market.

Most shareholders would consider it a positive that Rob LoCascio takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. While this is a good thing, you'll need to understand the business better before you can form an opinion. The graphic below shows how CEO compensation at LivePerson has changed from year to year.

Is LivePerson, Inc. Growing?

On average over the last three years, LivePerson, Inc. has shrunk earnings per share by 57% each year (measured with a line of best fit). It achieved revenue growth of 18% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that earnings per share has gone backwards over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has LivePerson, Inc. Been A Good Investment?

Most shareholders would probably be pleased with LivePerson, Inc. for providing a total return of 246% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

LivePerson, Inc. is currently paying its CEO below what is normal for companies of its size.

It's well worth noting that while Rob LoCascio is paid less than most company leaders (at similar sized companies), there isn't much EPS growth. Having said that, returns to shareholders have been great. Although we could see higher EPS growth, we'd argue the remuneration is not an issue, based on these observations. Looking into other areas, we've picked out 3 warning signs for LivePerson that investors should think about before committing capital to this stock.

Important note: LivePerson may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

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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. Thank you for reading.