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Despite positive share price growth of 13% for Corporate Office Properties Trust (NYSE:OFC) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 13 May 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
Comparing Corporate Office Properties Trust's CEO Compensation With the industry
Our data indicates that Corporate Office Properties Trust has a market capitalization of US$3.1b, and total annual CEO compensation was reported as US$4.5m for the year to December 2020. That's just a smallish increase of 5.3% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$752k.
On examining similar-sized companies in the industry with market capitalizations between US$2.0b and US$6.4b, we discovered that the median CEO total compensation of that group was US$5.4m. So it looks like Corporate Office Properties Trust compensates Steve Budorick in line with the median for the industry. Moreover, Steve Budorick also holds US$5.3m worth of Corporate Office Properties Trust 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 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. Although there is a difference in how total compensation is set, Corporate Office Properties Trust more or less reflects the market in terms of setting the salary. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Corporate Office Properties Trust's Growth
Corporate Office Properties Trust has reduced its funds from operations (FFO) by 8.2% per year over the last three years. Its revenue is down 2.0% over the previous year.
The decline in FFO is a bit concerning. 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. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Corporate Office Properties Trust Been A Good Investment?
Corporate Office Properties Trust has generated a total shareholder return of 13% over three years, so most shareholders would be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 4 warning signs for Corporate Office Properties Trust you should be aware of, and 1 of them is a bit unpleasant.
Switching gears from Corporate Office Properties Trust, 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.
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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