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The Cato Corporation (NYSE:CATO) has not performed well recently and CEO John P. Cato will probably need to up their game. At the upcoming AGM on 20 May 2021, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. The data we present below explains why we think CEO compensation is not consistent with recent performance.
Comparing The Cato Corporation's CEO Compensation With the industry
At the time of writing, our data shows that The Cato Corporation has a market capitalization of US$289m, and reported total annual CEO compensation of US$2.8m for the year to January 2021. Notably, that's a decrease of 48% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.1m.
On examining similar-sized companies in the industry with market capitalizations between US$100m and US$400m, we discovered that the median CEO total compensation of that group was US$1.4m. This suggests that John P. Cato is paid more than the median for the industry. Moreover, John P. Cato also holds US$36m worth of Cato stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
On an industry level, around 16% of total compensation represents salary and 84% is other remuneration. Cato pays out 40% of remuneration in the form of a salary, significantly higher than the industry average. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
The Cato Corporation's Growth
The Cato Corporation has reduced its earnings per share by 71% a year over the last three years. It saw its revenue drop 30% over the last year.
Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has The Cato Corporation Been A Good Investment?
With a three year total loss of 14% for the shareholders, The Cato Corporation would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be less generous with CEO compensation.
Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Cato that you should be aware of before investing.
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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