Here's Why We Think Daktronics, Inc.'s (NASDAQ:DAKT) CEO Compensation Looks Fair

The performance at Daktronics, Inc. (NASDAQ:DAKT) has been rather lacklustre of late and shareholders may be wondering what CEO Reece Kurtenbach is planning to do about this. At the next AGM coming up on 01 September 2021, they can influence managerial decision making through voting on resolutions, including executive remuneration. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

See our latest analysis for Daktronics

Comparing Daktronics, Inc.'s CEO Compensation With the industry

According to our data, Daktronics, Inc. has a market capitalization of US$270m, and paid its CEO total annual compensation worth US$450k over the year to May 2021. We note that's a decrease of 13% compared to last year. We note that the salary portion, which stands at US$386.7k constitutes the majority of total compensation received by the CEO.

On examining similar-sized companies in the industry with market capitalizations between US$100m and US$400m, we discovered that the median CEO total compensation of that group was US$1.0m. In other words, Daktronics pays its CEO lower than the industry median. Furthermore, Reece Kurtenbach directly owns US$3.0m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	US$387k	US$451k	86%
Other	US$63k	US$67k	14%
Total Compensation	US$450k	US$519k	100%

On an industry level, around 29% of total compensation represents salary and 71% is other remuneration. Daktronics pays out 86% of remuneration in the form of a salary, significantly higher than the industry average. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at Daktronics, Inc.'s Growth Numbers

Daktronics, Inc.'s earnings per share (EPS) grew 25% per year over the last three years. Its revenue is down 21% over the previous year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. 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 Daktronics, Inc. Been A Good Investment?

Since shareholders would have lost about 19% over three years, some Daktronics, Inc. investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

The fact that shareholders are sitting on a loss is certainly disheartening. The share price trend has diverged with the robust growth in EPS however, suggesting there may be other factors that could be driving the price performance. There needs to be more focus by management and the board to examine why the share price has diverged from fundamentals. The upcoming AGM will provide shareholders the opportunity to raise their concerns and evaluate if the board’s judgement and decision-making is aligned with their expectations.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Daktronics that you should be aware of before investing.

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.
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