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How Should Investors React To Kaiser Aluminum Corporation's (NASDAQ:KALU) CEO Pay?

Simply Wall St

Jack Hockema has been the CEO of Kaiser Aluminum Corporation (NASDAQ:KALU) since 2001. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Kaiser Aluminum

How Does Jack Hockema's Compensation Compare With Similar Sized Companies?

Our data indicates that Kaiser Aluminum Corporation is worth US$1.6b, and total annual CEO compensation was reported as US$5.4m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$915k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$1.0b to US$3.2b. The median total CEO compensation was US$4.1m.

As you can see, Jack Hockema is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Kaiser Aluminum Corporation is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.

The graphic below shows how CEO compensation at Kaiser Aluminum has changed from year to year.

NasdaqGS:KALU CEO Compensation, October 14th 2019

Is Kaiser Aluminum Corporation Growing?

Over the last three years Kaiser Aluminum Corporation has shrunk its earnings per share by an average of 1.1% per year (measured with a line of best fit). In the last year, its revenue is up 4.3%.

In the last three years the company has failed to grow earnings per share. The fairly low revenue growth fails to impress given that the earnings per share is down. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. It could be important to check this free visual depiction of what analysts expect for the future.

Has Kaiser Aluminum Corporation Been A Good Investment?

Kaiser Aluminum Corporation has served shareholders reasonably well, with a total return of 32% 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.

In Summary...

We compared the total CEO remuneration paid by Kaiser Aluminum Corporation, and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us. While shareholder returns are acceptable, they don't delight. So you may want to delve deeper, because we don't think the CEO pay is too low. Whatever your view on compensation, you might want to check if insiders are buying or selling Kaiser Aluminum shares (free trial).

Important note: Kaiser Aluminum may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.