Patrick Harshman has been the CEO of Harmonic Inc. (NASDAQ:HLIT) since 2006, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Harmonic.
Comparing Harmonic Inc.'s CEO Compensation With the industry
Our data indicates that Harmonic Inc. has a market capitalization of US$659m, and total annual CEO compensation was reported as US$3.4m for the year to December 2019. Notably, that's an increase of 44% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$530k.
On examining similar-sized companies in the industry with market capitalizations between US$400m and US$1.6b, we discovered that the median CEO total compensation of that group was US$2.5m. Accordingly, our analysis reveals that Harmonic Inc. pays Patrick Harshman north of the industry median. Moreover, Patrick Harshman also holds US$6.9m worth of Harmonic stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 28% of total compensation out of all the companies we analyzed, while other remuneration made up 72% of the pie. It's interesting to note that Harmonic 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.
Harmonic Inc.'s Growth
Harmonic Inc.'s earnings per share (EPS) grew 65% per year over the last three years. In the last year, its revenue is down 6.3%.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 Harmonic Inc. Been A Good Investment?
Boasting a total shareholder return of 60% over three years, Harmonic Inc. has done well by shareholders. 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.
As we noted earlier, Harmonic pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Importantly though, EPS growth and shareholder returns are very impressive over the last three years. Considering such exceptional results for the company, we'd venture to say CEO compensation is fair. And given most shareholders are probably very happy with recent returns, they might even think that Patrick deserves a raise!
CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 1 warning sign for Harmonic that investors should look into moving forward.
Switching gears from Harmonic, 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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