Here's Why Shareholders Will Not Be Complaining About Otter Tail Corporation's (NASDAQ:OTTR) CEO Pay Packet

Key Insights

• Otter Tail's Annual General Meeting to take place on 8th of April
• Salary of US$806.0k is part of CEO Chuck MacFarlane's total remuneration
• The total compensation is similar to the average for the industry
• Otter Tail's total shareholder return over the past three years was 98% while its EPS grew by 44% over the past three years

We have been pretty impressed with the performance at Otter Tail Corporation (NASDAQ:OTTR) recently and CEO Chuck MacFarlane deserves a mention for their role in it. The pleasing results would be something shareholders would keep in mind at the upcoming AGM on 8th of April. It is likely that the focus will be on company strategy going forward as shareholders hear from the board and cast their votes on resolutions such as executive remuneration and other matters. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.

See our latest analysis for Otter Tail

How Does Total Compensation For Chuck MacFarlane Compare With Other Companies In The Industry?

Our data indicates that Otter Tail Corporation has a market capitalization of US$3.6b, and total annual CEO compensation was reported as US$5.8m for the year to December 2023. Notably, that's an increase of 15% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$806k.

In comparison with other companies in the American Electric Utilities industry with market capitalizations ranging from US$2.0b to US$6.4b, the reported median CEO total compensation was US$5.1m. So it looks like Otter Tail compensates Chuck MacFarlane in line with the median for the industry. Moreover, Chuck MacFarlane also holds US$23m worth of Otter Tail stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	US$806k	US$775k	14%
Other	US$5.0m	US$4.3m	86%
Total Compensation	US$5.8m	US$5.1m	100%

Speaking on an industry level, nearly 13% of total compensation represents salary, while the remainder of 87% is other remuneration. Our data reveals that Otter Tail allocates salary more or less in line with the wider market. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Otter Tail Corporation's Growth

Over the past three years, Otter Tail Corporation has seen its earnings per share (EPS) grow by 44% per year. Its revenue is down 7.6% over the previous year.

Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. 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 Otter Tail Corporation Been A Good Investment?

We think that the total shareholder return of 98%, over three years, would leave most Otter Tail Corporation shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

Given the company's decent performance, the CEO remuneration policy might not be shareholders' central point of focus in the AGM. However, investors will get the chance to engage on key strategic initiatives and future growth opportunities for the company and set their longer-term expectations.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 2 warning signs for Otter Tail (of which 1 makes us a bit uncomfortable!) 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.