How Should Investors React To The North West Company Inc.'s (TSE:NWC) CEO Pay?
Edward Kennedy has been the CEO of The North West Company Inc. (TSE:NWC) since 1997. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
Check out our latest analysis for North West
How Does Edward Kennedy's Compensation Compare With Similar Sized Companies?
According to our data, The North West Company Inc. has a market capitalization of CA$1.2b, and paid its CEO total annual compensation worth CA$5.1m over the year to January 2020. That's a notable increase of 53% on last year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at CA$843k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. When we examined a selection of companies with market caps ranging from CA$563m to CA$2.3b, we found the median CEO total compensation was CA$2.4m.
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Speaking on an industry level, we can see that nearly 20% of total compensation represents salary, while the remainder of 80% is other remuneration. So it seems like there isn't a significant difference between North West and the broader market, in terms of salary allocation in the overall compensation package.
It would therefore appear that The North West Company Inc. pays Edward Kennedy more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business. The graphic below shows how CEO compensation at North West has changed from year to year.
Is The North West Company Inc. Growing?
Over the last three years The North West Company Inc. has seen earnings per share (EPS) move in a positive direction by an average of 8.4% per year (using a line of best fit). In the last year, its revenue is up 4.0%.
I'm not particularly impressed by the revenue growth, but I'm happy with the modest EPS growth. Considering these factors I'd say performance has been pretty decent, though not amazing. Shareholders might be interested in this free visualization of analyst forecasts.
Has The North West Company Inc. Been A Good Investment?
Given the total loss of 7.5% over three years, many shareholders in The North West Company Inc. are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
In Summary...
We compared total CEO remuneration at The North West Company Inc. with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.
While we have not been overly impressed by the business performance, the shareholder returns, over three years, have been disappointing. This doesn't look great when you consider CEO remuneration is up on last year. Shareholders may wish to consider further research. Although we don't think the CEO pay is too high, it is probably more on the generous side of things. Looking into other areas, we've picked out 3 warning signs for North West that investors should think about before committing capital to this stock.
If you want to buy a stock that is better than North West, this free list of high return, low debt companies is a great place to look.
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.
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