Does Louisiana-Pacific's (NYSE:LPX) CEO Salary Compare Well With Industry Peers?
Brad Southern became the CEO of Louisiana-Pacific Corporation (NYSE:LPX) in 2017, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
See our latest analysis for Louisiana-Pacific
Comparing Louisiana-Pacific Corporation's CEO Compensation With the industry
According to our data, Louisiana-Pacific Corporation has a market capitalization of US$3.6b, and paid its CEO total annual compensation worth US$5.6m over the year to December 2019. That's just a smallish increase of 4.4% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$961k.
In comparison with other companies in the industry with market capitalizations ranging from US$2.0b to US$6.4b, the reported median CEO total compensation was US$1.8m. Accordingly, our analysis reveals that Louisiana-Pacific Corporation pays Brad Southern north of the industry median. What's more, Brad Southern holds US$4.6m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Component | 2019 | 2018 | Proportion (2019) |
Salary | US$961k | US$849k | 17% |
Other | US$4.6m | US$4.5m | 83% |
Total Compensation | US$5.6m | US$5.4m | 100% |
On an industry level, around 29% of total compensation represents salary and 71% is other remuneration. Louisiana-Pacific pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Louisiana-Pacific Corporation's Growth
Louisiana-Pacific Corporation has reduced its earnings per share by 82% a year over the last three years. It saw its revenue drop 15% over the last year.
Few shareholders would be pleased to read that earnings have declined. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Louisiana-Pacific Corporation Been A Good Investment?
We think that the total shareholder return of 41%, over three years, would leave most Louisiana-Pacific Corporation shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
In Summary...
As previously discussed, Brad is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. We're not seeing great strides in earnings per share, but the company has clearly pleased some investors, given the returns over the last three years. So while we don't think, Brad is paid too much, shareholders may want to see some positive earnings growth before pay rises are given out.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 5 warning signs for Louisiana-Pacific that investors should look into moving forward.
Important note: Louisiana-Pacific is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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