Jack Lynch became the CEO of Houghton Mifflin Harcourt Company (NASDAQ:HMHC) in 2017. First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Jack Lynch's Compensation Compare With Similar Sized Companies?
Our data indicates that Houghton Mifflin Harcourt Company is worth US$720m, and total annual CEO compensation was reported as US$4.2m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$900k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a selection of companies with market caps ranging from US$400m to US$1.6b, we found the median CEO total compensation was US$2.6m.
As you can see, Jack Lynch is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Houghton Mifflin Harcourt Company is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
You can see, below, how CEO compensation at Houghton Mifflin Harcourt has changed over time.
Is Houghton Mifflin Harcourt Company Growing?
Houghton Mifflin Harcourt Company has increased its earnings per share (EPS) by an average of 25% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 7.0%.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. You might want to check this free visual report on analyst forecasts for future earnings.
Has Houghton Mifflin Harcourt Company Been A Good Investment?
Since shareholders would have lost about 48% over three years, some Houghton Mifflin Harcourt Company shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.
We compared total CEO remuneration at Houghton Mifflin Harcourt Company with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.
However, the earnings per share growth over three years is certainly impressive. Having said that, shareholders may be disappointed with the weak returns over the last three years. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. Whatever your view on compensation, you might want to check if insiders are buying or selling Houghton Mifflin Harcourt shares (free trial).
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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