This article will reflect on the compensation paid to Roy Tjay Thung who has served as CEO of Independence Holding Company (NYSE:IHC) since 2000. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Independence Holding.
Comparing Independence Holding Company's CEO Compensation With the industry
At the time of writing, our data shows that Independence Holding Company has a market capitalization of US$488m, and reported total annual CEO compensation of US$3.2m for the year to December 2019. Notably, that's an increase of 53% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$494k.
For comparison, other companies in the same industry with market capitalizations ranging between US$200m and US$800m had a median total CEO compensation of US$3.0m. From this we gather that Roy Tjay Thung is paid around the median for CEOs in the industry. Moreover, Roy Tjay Thung also holds US$7.9m worth of Independence Holding stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Speaking on an industry level, nearly 18% of total compensation represents salary, while the remainder of 82% is other remuneration. It's interesting to note that Independence Holding allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Independence Holding Company's Growth
Over the last three years, Independence Holding Company has shrunk its earnings per share by 25% per year. In the last year, its revenue is up 7.7%.
Few shareholders would be pleased to read that earnings have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Independence Holding Company Been A Good Investment?
Most shareholders would probably be pleased with Independence Holding Company for providing a total return of 53% over three years. 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.
As we touched on above, Independence Holding Company is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This isn't great when you look at it against the backdrop of earnings growth, which has been negative for the past three years. On the flip side, shareholder returns have been strong over the same time, which is certainly a positive sign. We're not saying CEO compensation is too generous, but shareholders will probably want to see an increase in earnings per share before agreeing the business should pay any more.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Independence Holding that you should be aware of before investing.
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.
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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