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Scott Ward became the CEO of Cardiovascular Systems, Inc. (NASDAQ:CSII) in 2016, 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.
How Does Total Compensation For Scott Ward Compare With Other Companies In The Industry?
Our data indicates that Cardiovascular Systems, Inc. has a market capitalization of US$1.4b, and total annual CEO compensation was reported as US$4.7m for the year to June 2020. That's just a smallish increase of 3.1% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$628k.
On examining similar-sized companies in the industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$4.5m. This suggests that Cardiovascular Systems remunerates its CEO largely in line with the industry average. Furthermore, Scott Ward directly owns US$18m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 20% of total compensation represents salary and 80% is other remuneration. Cardiovascular Systems 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.
A Look at Cardiovascular Systems, Inc.'s Growth Numbers
Over the last three years, Cardiovascular Systems, Inc. has shrunk its earnings per share by 98% per year. It saw its revenue drop 4.7% over the last year.
Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Cardiovascular Systems, Inc. Been A Good Investment?
Most shareholders would probably be pleased with Cardiovascular Systems, Inc. for providing a total return of 50% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
As previously discussed, Scott is compensated close to the median for companies of its size, and which belong to the same industry. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. On the other hand, shareholder returns are showing positive trends over the same time frame. We wouldn't say CEO compensation is too high, but shrinking EPS is undoubtedly an issue that will have to be addressed.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for Cardiovascular Systems that investors should be aware of in a dynamic business environment.
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.
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