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This article will reflect on the compensation paid to Tawny Lam who has served as CEO of Nova LifeStyle, Inc. (NASDAQ:NVFY) since 2016. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Nova LifeStyle, Inc.'s CEO Compensation With the industry
According to our data, Nova LifeStyle, Inc. has a market capitalization of US$9.4m, and paid its CEO total annual compensation worth US$100k over the year to December 2019. We note that's a decrease of 29% compared to last year. Notably, the salary of US$100k is the entirety of the CEO compensation.
For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$524k. That is to say, Tawny Lam is paid under the industry median. What's more, Tawny Lam holds US$100k worth of shares in the company in their own name.
Talking in terms of the industry, salary represented approximately 25% of total compensation out of all the companies we analyzed, while other remuneration made up 75% of the pie. On a company level, Nova LifeStyle prefers to reward its CEO through a salary, opting not to pay Tawny Lam through non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
Nova LifeStyle, Inc.'s Growth
Nova LifeStyle, Inc. has reduced its earnings per share by 75% a year over the last three years. It saw its revenue drop 68% over the last year.
Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Nova LifeStyle, Inc. Been A Good Investment?
Given the total shareholder loss of 79% over three years, many shareholders in Nova LifeStyle, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.
Nova LifeStyle rewards its CEO solely through a salary, ignoring non-salary benefits completely. As previously discussed, Tawny is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. While we are quite underwhelmed with EPS growth, the shareholder returns over the past three years have also failed to impress us. It's tough to say that Tawny is earning a very high compensation, but shareholders will likely want to see healthier investor returns before agreeing that a raise is in order.
CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 3 warning signs for Nova LifeStyle you should be aware of, and 2 of them are significant.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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