Increases to Extreme Networks, Inc.'s (NASDAQ:EXTR) CEO Compensation Might Cool off for now
Extreme Networks, Inc. (NASDAQ:EXTR) 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 04 November 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.
See our latest analysis for Extreme Networks
Comparing Extreme Networks, Inc.'s CEO Compensation With the industry
Our data indicates that Extreme Networks, Inc. has a market capitalization of US$1.3b, and total annual CEO compensation was reported as US$5.6m for the year to June 2021. We note that's an increase of 8.0% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$725k.
On examining similar-sized companies in the industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$3.7m. Accordingly, our analysis reveals that Extreme Networks, Inc. pays Ed Meyercord north of the industry median. Moreover, Ed Meyercord also holds US$7.2m worth of Extreme Networks 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$725k | US$617k | 13% |
Other | US$4.8m | US$4.5m | 87% |
Total Compensation | US$5.6m | US$5.2m | 100% |
On an industry level, roughly 21% of total compensation represents salary and 79% is other remuneration. In Extreme Networks' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Extreme Networks, Inc.'s Growth
Extreme Networks, Inc. has reduced its earnings per share by 9.8% a year over the last three years. Its revenue is up 6.5% over the last year.
The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. 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 Extreme Networks, Inc. Been A Good Investment?
We think that the total shareholder return of 70%, over three years, would leave most Extreme Networks, Inc. shareholders smiling. 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.
To Conclude...
Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. 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.
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. We did our research and identified 3 warning signs (and 1 which is a bit unpleasant) in Extreme Networks we think you should know about.
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. 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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