We Discuss Why Valhi, Inc.'s (NYSE:VHI) CEO Compensation May Be Closely Reviewed
Valhi, Inc. (NYSE:VHI) has not performed well recently and CEO Robert Graham will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 27 May 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.
Check out our latest analysis for Valhi
Comparing Valhi, Inc.'s CEO Compensation With the industry
Our data indicates that Valhi, Inc. has a market capitalization of US$700m, and total annual CEO compensation was reported as US$8.1m for the year to December 2020. That's a notable increase of 18% on last year. It is worth noting that the CEO compensation consists entirely of the salary, worth US$8.1m.
On comparing similar companies from the same industry with market caps ranging from US$400m to US$1.6b, we found that the median CEO total compensation was US$4.1m. Accordingly, our analysis reveals that Valhi, Inc. pays Robert Graham north of the industry median. Moreover, Robert Graham also holds US$520k worth of Valhi stock directly under their own name.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$8.1m | US$6.9m | 100% |
Other | - | - | - |
Total Compensation | US$8.1m | US$6.9m | 100% |
On an industry level, around 17% of total compensation represents salary and 83% is other remuneration. On a company level, Valhi prefers to reward its CEO through a salary, opting not to pay Robert Graham through non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
A Look at Valhi, Inc.'s Growth Numbers
Over the last three years, Valhi, Inc. has shrunk its earnings per share by 51% per year. In the last year, its revenue is up 1.2%.
Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Valhi, Inc. Been A Good Investment?
With a total shareholder return of -67% over three years, Valhi, Inc. shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
To Conclude...
Valhi rewards its CEO solely through a salary, ignoring non-salary benefits completely. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 3 warning signs for Valhi that investors should think about before committing capital to this 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.
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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