How Should Investors Feel About NorthWestern's (NASDAQ:NWE) CEO Remuneration?

This article will reflect on the compensation paid to Bob Rowe who has served as CEO of NorthWestern Corporation (NASDAQ:NWE) since 2008. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for NorthWestern

Comparing NorthWestern Corporation's CEO Compensation With the industry

According to our data, NorthWestern Corporation has a market capitalization of US$2.7b, and paid its CEO total annual compensation worth US$3.3m over the year to December 2019. That's a fairly small increase of 4.2% over the previous year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$644k.

For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$2.8m. This suggests that NorthWestern remunerates its CEO largely in line with the industry average. Furthermore, Bob Rowe directly owns US$9.3m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 14% of total compensation out of all the companies we analyzed, while other remuneration made up 86% of the pie. It's interesting to note that NorthWestern pays out a greater portion of remuneration through salary, compared to the industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

NorthWestern Corporation's Growth

Over the last three years, NorthWestern Corporation has not seen its earnings per share change much, though they have deteriorated slightly. In the last year, its revenue is down 2.1%.

A lack of EPS improvement is not good to see. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 NorthWestern Corporation Been A Good Investment?

Given the total shareholder loss of 2.7% over three years, many shareholders in NorthWestern Corporation are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

As previously discussed, Bob is compensated close to the median for companies of its size, and which belong to the same industry. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 1 warning sign for NorthWestern that investors should look into moving forward.

Important note: NorthWestern is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. 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.
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