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Increases to CEO Compensation Might Be Put On Hold For Now at Key Tronic Corporation (NASDAQ:KTCC)

Shareholders of Key Tronic Corporation (NASDAQ:KTCC) will have been dismayed by the negative share price return over the last three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 27 October 2022. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

View our latest analysis for Key Tronic

How Does Total Compensation For Craig Gates Compare With Other Companies In The Industry?

At the time of writing, our data shows that Key Tronic Corporation has a market capitalization of US$44m, and reported total annual CEO compensation of US$1.4m for the year to July 2022. That's a notable decrease of 15% on last year. We note that the salary of US$799.5k makes up a sizeable portion of the total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$408k. Hence, we can conclude that Craig Gates is remunerated higher than the industry median. Moreover, Craig Gates also holds US$899k worth of Key Tronic stock directly under their own name.

Component

2022

2021

Proportion (2022)

Salary

US$800k

US$685k

57%

Other

US$592k

US$949k

43%

Total Compensation

US$1.4m

US$1.6m

100%

Speaking on an industry level, nearly 30% of total compensation represents salary, while the remainder of 70% is other remuneration. It's interesting to note that Key Tronic pays out a greater portion of remuneration through salary, compared to the industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
ceo-compensation

A Look at Key Tronic Corporation's Growth Numbers

Key Tronic Corporation's earnings per share (EPS) grew 70% per year over the last three years. It achieved revenue growth of 2.6% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's also good to see modest revenue growth, suggesting the underlying business is healthy. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Key Tronic Corporation Been A Good Investment?

Few Key Tronic Corporation shareholders would feel satisfied with the return of -33% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 2 warning signs for Key Tronic (of which 1 doesn't sit too well with us!) that you should know about in order to have a holistic understanding of the stock.

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.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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