This article will reflect on the compensation paid to C. Goncalves who has served as CEO of Cleveland-Cliffs Inc. (NYSE:CLF) since 2014. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Cleveland-Cliffs.
Comparing Cleveland-Cliffs Inc.'s CEO Compensation With the industry
According to our data, Cleveland-Cliffs Inc. has a market capitalization of US$2.5b, and paid its CEO total annual compensation worth US$16m over the year to December 2019. That's just a smallish increase of 4.0% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.4m.
On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$7.6m. Hence, we can conclude that C. Goncalves is remunerated higher than the industry median. Furthermore, C. Goncalves directly owns US$19m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, around 37% of total compensation represents salary and 63% is other remuneration. Cleveland-Cliffs 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.
Cleveland-Cliffs Inc.'s Growth
Over the past three years, Cleveland-Cliffs Inc. has seen its earnings per share (EPS) grow by 9.3% per year. Its revenue is up 8.8% over the last year.
We're not particularly impressed by the revenue growth, but it is good to see modest EPS growth. It's clear the performance has been quite decent, but it it falls short of outstanding,based on this information. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Cleveland-Cliffs Inc. Been A Good Investment?
Given the total shareholder loss of 7.2% over three years, many shareholders in Cleveland-Cliffs Inc. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.
As we noted earlier, Cleveland-Cliffs pays its CEO higher than the norm for similar-sized companies belonging to the same industry. The growth in the business has been uninspiring, but the shareholder returns for Cleveland-Cliffs have arguably been worse, over the last three years. This doesn't look good when you see that C. is earning more than the industry median. All things considered, we believe shareholders would be disappointed to see C.'s compensation grow without first seeing an improvement in the performance of the company.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 2 warning signs for Cleveland-Cliffs (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.
Important note: Cleveland-Cliffs is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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