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Is Callaway Golf Company's (NYSE:ELY) CEO Being Overpaid?

Simply Wall St

Chip Brewer has been the CEO of Callaway Golf Company (NYSE:ELY) since 2012. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Callaway Golf

How Does Chip Brewer's Compensation Compare With Similar Sized Companies?

Our data indicates that Callaway Golf Company is worth US$996m, and total annual CEO compensation was reported as US$5.8m for the year to December 2019. That's actually a decrease on the year before. We think total compensation is more important but we note that the CEO salary is lower, at US$895k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We examined companies with market caps from US$400m to US$1.6b, and discovered that the median CEO total compensation of that group was US$3.2m.

Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Callaway Golf. On an industry level, roughly 18% of total compensation represents salary and 82% is other remuneration. So it seems like there isn't a significant difference between Callaway Golf and the broader market, in terms of salary allocation in the overall compensation package.

As you can see, Chip Brewer is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Callaway Golf Company is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance. The graphic below shows how CEO compensation at Callaway Golf has changed from year to year.

NYSE:ELY CEO Compensation April 7th 2020

Is Callaway Golf Company Growing?

On average over the last three years, Callaway Golf Company has shrunk earnings per share by 34% each year (measured with a line of best fit). Its revenue is up 37% over last year.

Investors should note that, over three years, earnings per share are down. On the other hand, the strong revenue growth suggests the business is growing. These two metric are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Shareholders might be interested in this free visualization of analyst forecasts.

Has Callaway Golf Company Been A Good Investment?

With a three year total loss of 7.6%, Callaway Golf Company would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We compared the total CEO remuneration paid by Callaway Golf Company, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Over the last three years, shareholder returns have been downright disappointing, and the underlying business has failed to impress us. Shareholders may wish to consider further research. Although we don't think the CEO pay is too high, it is probably more on the generous side of things. CEO compensation is an important area to keep your eyes on, but we've also identified 3 warning signs for Callaway Golf (1 is significant!) that you should be aware of before investing here.

Important note: Callaway Golf may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.