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Here's Why Shareholders May Want To Be Cautious With Increasing Dillard's, Inc.'s (NYSE:DDS) CEO Pay Packet

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Dillard's, Inc. (NYSE:DDS) 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. The upcoming AGM on 15 May 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

See our latest analysis for Dillard's

How Does Total Compensation For William Dillard Compare With Other Companies In The Industry?

Our data indicates that Dillard's, Inc. has a market capitalization of US$2.3b, and total annual CEO compensation was reported as US$2.9m for the year to January 2021. We note that's an increase of 52% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.1m.

For comparison, other companies in the same industry with market capitalizations ranging between US$1.0b and US$3.2b had a median total CEO compensation of US$541k. This suggests that William Dillard is paid more than the median for the industry. Moreover, William Dillard also holds US$99m worth of Dillard's stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2021

2020

Proportion (2021)

Salary

US$1.1m

US$1.1m

36%

Other

US$1.9m

US$858k

64%

Total Compensation

US$2.9m

US$1.9m

100%

On an industry level, around 12% of total compensation represents salary and 88% is other remuneration. Dillard's is paying a higher share of its remuneration through a 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.

ceo-compensation
ceo-compensation

Dillard's, Inc.'s Growth

Over the last three years, Dillard's, Inc. has shrunk its earnings per share by 83% per year. It saw its revenue drop 30% over the last year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Dillard's, Inc. Been A Good Investment?

Most shareholders would probably be pleased with Dillard's, Inc. for providing a total return of 55% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

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 2 warning signs for Dillard's that investors should look into moving forward.

Switching gears from Dillard's, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.