What Does KAR Auction Services' (NYSE:KAR) CEO Pay Reveal?
Jim Hallett has been the CEO of KAR Auction Services, Inc. (NYSE:KAR) since 2009, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether KAR Auction Services pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
See our latest analysis for KAR Auction Services
Comparing KAR Auction Services, Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that KAR Auction Services, Inc. has a market capitalization of US$2.1b, and reported total annual CEO compensation of US$5.5m for the year to December 2019. That's a notable decrease of 9.9% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$975k.
In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$4.4m. This suggests that KAR Auction Services remunerates its CEO largely in line with the industry average. Furthermore, Jim Hallett directly owns US$7.1m worth of shares in the company, implying that they are deeply invested in the company's success.
Component | 2019 | 2018 | Proportion (2019) |
Salary | US$975k | US$975k | 18% |
Other | US$4.6m | US$5.2m | 82% |
Total Compensation | US$5.5m | US$6.1m | 100% |
On an industry level, roughly 23% of total compensation represents salary and 77% is other remuneration. KAR Auction Services sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
KAR Auction Services, Inc.'s Growth
Over the last three years, KAR Auction Services, Inc. has shrunk its earnings per share by 62% per year. It saw its revenue drop 14% over the last year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has KAR Auction Services, Inc. Been A Good Investment?
Given the total shareholder loss of 3.6% over three years, many shareholders in KAR Auction Services, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.
To Conclude...
As previously discussed, Jim is compensated close to the median for companies of its size, and which belong to the same industry. On the other hand, EPS growth and total shareholder return have been negative for the last three years. We'd stop short of saying compensation is inappropriate, but we would understand if shareholders had questions regarding a future raise.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 3 warning signs for KAR Auction Services (1 can't be ignored!) that you should be aware of before investing here.
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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