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Is First Foundation Inc.'s (NASDAQ:FFWM) CEO Being Overpaid?

Simply Wall St

In 2009, Scott Kavanaugh was appointed CEO of First Foundation Inc. (NASDAQ:FFWM). First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for First Foundation

How Does Scott Kavanaugh's Compensation Compare With Similar Sized Companies?

According to our data, First Foundation Inc. has a market capitalization of US$543m, and paid its CEO total annual compensation worth US$1.6m over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$706k. When we examined a selection of companies with market caps ranging from US$200m to US$800m, we found the median CEO total compensation was US$2.3m.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where First Foundation stands. Speaking on an industry level, we can see that nearly 43% of total compensation represents salary, while the remainder of 57% is other remuneration. First Foundation is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation

Most shareholders would consider it a positive that Scott Kavanaugh takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. Though positive, it's important we delve into the performance of the actual business. The graphic below shows how CEO compensation at First Foundation has changed from year to year.

NasdaqGM:FFWM CEO Compensation April 26th 2020

Is First Foundation Inc. Growing?

First Foundation Inc. has seen earnings per share (EPS) move positively by an average of 17% a year, over the last three years (using a line of best fit). It achieved revenue growth of 9.6% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. You might want to check this free visual report on analyst forecasts for future earnings.

Has First Foundation Inc. Been A Good Investment?

Given the total loss of 21% over three years, many shareholders in First Foundation Inc. are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

It appears that First Foundation Inc. remunerates its CEO below most similar sized companies.

Many would consider this to indicate that the pay is modest since the business is growing. Despite some positives, it is likely that shareholders wanted better returns, given the performance over the last three years. So while we don't think, Scott Kavanaugh is paid too much, shareholders may hope that business performance translates to investment returns before pay rises are given out. When I see fairly low remuneration, combined with earnings per share growth, but without big share price gains, it makes me want to research the potential for future gains. Shifting gears from CEO pay for a second, we've picked out 3 warning signs for First Foundation that investors should be aware of in a dynamic business environment.

If you want to buy a stock that is better than First Foundation, this free list of high return, low debt companies is a great place to look.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.