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What Can We Make Of Eastern's (NASDAQ:EML) CEO Compensation?

Simply Wall St
·3 mins read

Gus Vlak has been the CEO of The Eastern Company (NASDAQ:EML) since 2016, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Eastern pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for Eastern

Comparing The Eastern Company's CEO Compensation With the industry

According to our data, The Eastern Company has a market capitalization of US$128m, and paid its CEO total annual compensation worth US$902k over the year to December 2019. That's a notable decrease of 22% on last year. We note that the salary portion, which stands at US$461.3k constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$1.1m. This suggests that Eastern remunerates its CEO largely in line with the industry average. What's more, Gus Vlak holds US$376k worth of shares in the company in their own name.

Component

2019

2018

Proportion (2019)

Salary

US$461k

US$450k

51%

Other

US$441k

US$708k

49%

Total Compensation

US$902k

US$1.2m

100%

On an industry level, roughly 16% of total compensation represents salary and 84% is other remuneration. Eastern is paying a higher share of its remuneration through a salary in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
ceo-compensation

The Eastern Company's Growth

Over the past three years, The Eastern Company has seen its earnings per share (EPS) grow by 8.3% per year. In the last year, its revenue is up 3.1%.

We're not particularly impressed by the revenue growth, but the modest improvement in EPS is good. It's clear the performance has been quite decent, but it it falls short of outstanding,based on this information. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has The Eastern Company Been A Good Investment?

Since shareholders would have lost about 21% over three years, some The Eastern Company investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

As previously discussed, Gus is compensated close to the median for companies of its size, and which belong to the same industry. Meanwhile, Eastern is suffering from adverse shareholder returns and althoughEPS have grown over the past three years, they have not been extraordinary. We'd stop short of saying CEO compensation is inappropriate, but without an improvement in performance, it's sure to draw criticism. Shareholders will also not want to see performance improving before agreeing to any raise.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 2 warning signs for Eastern 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.