Shareholders Will Probably Hold Off On Increasing Black Hills Corporation's (NYSE:BKH) CEO Compensation For The Time Being

Key Insights

• Black Hills' Annual General Meeting to take place on 23rd of April
• Total pay for CEO Linn Evans includes US$893.3k salary
• Total compensation is similar to the industry average
• Black Hills' EPS grew by 1.7% over the past three years while total shareholder loss over the past three years was 18%

In the past three years, the share price of Black Hills Corporation (NYSE:BKH) has struggled to grow and now shareholders are sitting on a loss. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. These are some of the concerns that shareholders may want to bring up at the next AGM held on 23rd of April. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Black Hills

How Does Total Compensation For Linn Evans Compare With Other Companies In The Industry?

At the time of writing, our data shows that Black Hills Corporation has a market capitalization of US$3.5b, and reported total annual CEO compensation of US$5.6m for the year to December 2023. That's a notable increase of 26% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$893k.

In comparison with other companies in the American Integrated Utilities industry with market capitalizations ranging from US$2.0b to US$6.4b, the reported median CEO total compensation was US$4.4m. This suggests that Black Hills remunerates its CEO largely in line with the industry average. What's more, Linn Evans holds US$7.8m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	US$893k	US$854k	16%
Other	US$4.7m	US$3.6m	84%
Total Compensation	US$5.6m	US$4.5m	100%

Speaking on an industry level, nearly 13% of total compensation represents salary, while the remainder of 87% is other remuneration. Black Hills pays out 16% of remuneration in the form of a salary, significantly higher than the industry average. 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 Black Hills Corporation's Growth Numbers

Black Hills Corporation's earnings per share (EPS) grew 1.7% per year over the last three years. Its revenue is down 8.6% over the previous year.

We would prefer it if there was revenue growth, but the modest improvement in EPS is good. It's hard to reach a conclusion about business performance right now. This may be one to watch. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Black Hills Corporation Been A Good Investment?

Given the total shareholder loss of 18% over three years, many shareholders in Black Hills Corporation are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 2 warning signs (and 1 which shouldn't be ignored) in Black Hills we think you should know about.

Important note: Black Hills 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. 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.