We Discuss Why SecureWorks Corp.'s (NASDAQ:SCWX) CEO Compensation May Be Closely Reviewed

Key Insights

• SecureWorks' Annual General Meeting to take place on 25th of June
• Salary of US$500.0k is part of CEO Wendy Thomas's total remuneration
• The overall pay is 285% above the industry average
• SecureWorks' three-year loss to shareholders was 72% while its EPS was down 40% over the past three years

Shareholders will probably not be too impressed with the underwhelming results at SecureWorks Corp. (NASDAQ:SCWX) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 25th of June. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for SecureWorks

Comparing SecureWorks Corp.'s CEO Compensation With The Industry

According to our data, SecureWorks Corp. has a market capitalization of US$537m, and paid its CEO total annual compensation worth US$8.2m over the year to February 2024. Notably, that's an increase of 24% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$500k.

In comparison with other companies in the American Software industry with market capitalizations ranging from US$200m to US$800m, the reported median CEO total compensation was US$2.1m. Accordingly, our analysis reveals that SecureWorks Corp. pays Wendy Thomas north of the industry median. Furthermore, Wendy Thomas directly owns US$5.2m worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, roughly 16% of total compensation represents salary and 84% is other remuneration. It's interesting to note that SecureWorks allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at SecureWorks Corp.'s Growth Numbers

Over the last three years, SecureWorks Corp. has shrunk its earnings per share by 40% per year. It saw its revenue drop 18% over the last year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. 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 SecureWorks Corp. Been A Good Investment?

The return of -72% over three years would not have pleased SecureWorks Corp. shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. 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.

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 3 warning signs for SecureWorks (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the 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.

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