The share price of Eastman Chemical Company (NYSE:EMN) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. The upcoming AGM on 06 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. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.
How Does Total Compensation For Mark Costa Compare With Other Companies In The Industry?
According to our data, Eastman Chemical Company has a market capitalization of US$16b, and paid its CEO total annual compensation worth US$14m over the year to December 2020. That's slightly lower by 6.8% over the previous year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.3m.
For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$12m. This suggests that Eastman Chemical remunerates its CEO largely in line with the industry average. Furthermore, Mark Costa directly owns US$37m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, around 17% of total compensation represents salary and 83% is other remuneration. Eastman Chemical sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Eastman Chemical Company's Growth
Over the last three years, Eastman Chemical Company has shrunk its earnings per share by 28% per year. In the last year, its revenue is down 8.6%.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Eastman Chemical Company Been A Good Investment?
Eastman Chemical Company has served shareholders reasonably well, with a total return of 25% over three years. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. 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 4 warning signs for Eastman Chemical that investors should look into moving forward.
Important note: Eastman Chemical 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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