International Paper Company's (NYSE:IP) CEO Compensation Is Looking A Bit Stretched At The Moment
Despite International Paper Company's (NYSE:IP) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. Some of these issues will occupy shareholders' minds as the AGM rolls around on 10 May 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. 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.
View our latest analysis for International Paper
How Does Total Compensation For Mark Sutton Compare With Other Companies In The Industry?
According to our data, International Paper Company has a market capitalization of US$23b, and paid its CEO total annual compensation worth US$18m over the year to December 2020. Notably, that's an increase of 15% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.5m.
For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$10m. Hence, we can conclude that Mark Sutton is remunerated higher than the industry median. What's more, Mark Sutton holds US$36m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$1.5m | US$1.5m | 8% |
Other | US$17m | US$14m | 92% |
Total Compensation | US$18m | US$16m | 100% |
Talking in terms of the industry, salary represented approximately 13% of total compensation out of all the companies we analyzed, while other remuneration made up 87% of the pie. International Paper pays a modest slice of remuneration through salary, as compared to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at International Paper Company's Growth Numbers
Over the last three years, International Paper Company has shrunk its earnings per share by 23% per year. Its revenue is down 6.8% over the previous year.
Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has International Paper Company Been A Good Investment?
International Paper Company has served shareholders reasonably well, with a total return of 30% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
In Summary...
Shareholder returns, while positive, should be looked at along with earnings, which have not grown at all recently. This makes us think the share price momentum may slow in the future. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.
CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for International Paper that investors should be aware of in a dynamic business environment.
Switching gears from International Paper, 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.
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