Here's Why Armstrong World Industries, Inc.'s (NYSE:AWI) CEO Compensation Is The Least Of Shareholders' Concerns
Armstrong World Industries, Inc. (NYSE:AWI) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 24 June 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. 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 Armstrong World Industries
Comparing Armstrong World Industries, Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that Armstrong World Industries, Inc. has a market capitalization of US$5.0b, and reported total annual CEO compensation of US$5.1m for the year to December 2020. That is, the compensation was roughly the same as last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$823k.
For comparison, other companies in the same industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$5.2m. From this we gather that Vic Grizzle is paid around the median for CEOs in the industry. Furthermore, Vic Grizzle directly owns US$32m worth of shares in the company, implying that they are deeply invested in the company's success.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$823k | US$788k | 16% |
Other | US$4.3m | US$4.3m | 84% |
Total Compensation | US$5.1m | US$5.1m | 100% |
Speaking on an industry level, nearly 16% of total compensation represents salary, while the remainder of 84% is other remuneration. There isn't a significant difference between Armstrong World Industries and the broader market, in terms of salary allocation in the overall compensation package. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Armstrong World Industries, Inc.'s Growth
Armstrong World Industries, Inc. has reduced its earnings per share by 4.8% a year over the last three years. Its revenue is down 10% over the previous year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Armstrong World Industries, Inc. Been A Good Investment?
Most shareholders would probably be pleased with Armstrong World Industries, Inc. for providing a total return of 68% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
In Summary...
Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 1 warning sign for Armstrong World Industries that investors should look into moving forward.
Important note: Armstrong World Industries 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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