Here's Why Babcock & Wilcox Enterprises, Inc.'s (NYSE:BW) CEO Compensation Is The Least Of Shareholders Concerns
Performance at Babcock & Wilcox Enterprises, Inc. (NYSE:BW) has been rather uninspiring recently and shareholders may be wondering how CEO Kenny Young plans to fix this. One way they can exercise their influence on management is through voting on resolutions, such as executive remuneration at the next AGM, coming up on 20 May 2021. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. We have prepared some analysis below to show that CEO compensation looks to be reasonable.
Check out our latest analysis for Babcock & Wilcox Enterprises
Comparing Babcock & Wilcox Enterprises, Inc.'s CEO Compensation With the industry
Our data indicates that Babcock & Wilcox Enterprises, Inc. has a market capitalization of US$624m, and total annual CEO compensation was reported as US$2.0m for the year to December 2020. We note that's a decrease of 67% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$750k.
On comparing similar companies from the same industry with market caps ranging from US$400m to US$1.6b, we found that the median CEO total compensation was US$3.4m. In other words, Babcock & Wilcox Enterprises pays its CEO lower than the industry median. Furthermore, Kenny Young directly owns US$7.5m worth of shares in the company, implying that they are deeply invested in the company's success.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$750k | US$750k | 38% |
Other | US$1.2m | US$5.3m | 62% |
Total Compensation | US$2.0m | US$6.0m | 100% |
On an industry level, around 29% of total compensation represents salary and 71% is other remuneration. Babcock & Wilcox Enterprises is paying a higher share of its remuneration through a salary in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Babcock & Wilcox Enterprises, Inc.'s Growth Numbers
Babcock & Wilcox Enterprises, Inc. has seen its earnings per share (EPS) increase by 115% a year over the past three years. It saw its revenue drop 24% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Babcock & Wilcox Enterprises, Inc. Been A Good Investment?
Few Babcock & Wilcox Enterprises, Inc. shareholders would feel satisfied with the return of -71% over three years. This suggests it would be unwise for the company to pay the CEO too generously.
To Conclude...
The fact that shareholders are sitting on a loss is certainly disheartening. This diverges with the robust growth in EPS, suggesting that there is a large discrepancy between share price and fundamentals. A key focus for the board and management will be how to align the share price with fundamentals. In the upcoming AGM, shareholders should take this opportunity to raise these concerns with the board and revisit their investment thesis with regards to the company.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 4 warning signs for Babcock & Wilcox Enterprises (3 are significant!) that you should be aware of before investing here.
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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