F5 Networks, Inc.'s (NASDAQ:FFIV) CEO Compensation Is Looking A Bit Stretched At The Moment
The share price of F5 Networks, Inc. (NASDAQ:FFIV) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 11 March 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.
See our latest analysis for F5 Networks
How Does Total Compensation For Francois Locoh-Donou Compare With Other Companies In The Industry?
Our data indicates that F5 Networks, Inc. has a market capitalization of US$12b, and total annual CEO compensation was reported as US$11m for the year to September 2020. We note that's an increase of 15% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$875k.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$1.4m. Hence, we can conclude that Francois Locoh-Donou is remunerated higher than the industry median. Moreover, Francois Locoh-Donou also holds US$14m worth of F5 Networks stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$875k | US$850k | 8% |
Other | US$10m | US$8.6m | 92% |
Total Compensation | US$11m | US$9.5m | 100% |
On an industry level, roughly 27% of total compensation represents salary and 73% is other remuneration. F5 Networks sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
F5 Networks, Inc.'s Growth
Over the last three years, F5 Networks, Inc. has shrunk its earnings per share by 9.5% per year. Its revenue is up 6.1% over the last year.
The decline in EPS is a bit concerning. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has F5 Networks, Inc. Been A Good Investment?
F5 Networks, Inc. has served shareholders reasonably well, with a total return of 26% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
To Conclude...
Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.
CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for F5 Networks that investors should be aware of in a dynamic business environment.
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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