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How Should Investors React To NorthWestern's (NASDAQ:NWE) CEO Pay?

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Simply Wall St
·4 min read
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Bob Rowe became the CEO of NorthWestern Corporation (NASDAQ:NWE) in 2008, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether NorthWestern pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for NorthWestern

Comparing NorthWestern Corporation's CEO Compensation With the industry

Our data indicates that NorthWestern Corporation has a market capitalization of US$2.9b, and total annual CEO compensation was reported as US$3.3m for the year to December 2019. That's just a smallish increase of 4.2% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$644k.

In comparison with other companies in the industry with market capitalizations ranging from US$2.0b to US$6.4b, the reported median CEO total compensation was US$3.3m. From this we gather that Bob Rowe is paid around the median for CEOs in the industry. Moreover, Bob Rowe also holds US$10m worth of NorthWestern stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2019

2018

Proportion (2019)

Salary

US$644k

US$625k

20%

Other

US$2.7m

US$2.5m

80%

Total Compensation

US$3.3m

US$3.2m

100%

Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. NorthWestern is paying a higher share of its remuneration through a salary in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
ceo-compensation

NorthWestern Corporation's Growth

Over the last three years, NorthWestern Corporation has not seen its earnings per share change much, though they have deteriorated slightly. In the last year, its revenue is down 2.1%.

Its a bit disappointing to see that the company has failed to grow its EPS. 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 NorthWestern Corporation Been A Good Investment?

NorthWestern Corporation has generated a total shareholder return of 1.1% over three years, so most shareholders wouldn't be too disappointed. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

As previously discussed, Bob is compensated close to the median for companies of its size, and which belong to the same industry. NorthWestern has had a poor showing when it comes to EPS growth, and it's tough to say that shareholder returns have done much to excite us. This doesn't compare well with CEO compensation, which is close to the industry median. Considering all of this, we can't say the CEO is underpaid, and moving forward shareholders will likely want to see higher growth to justify any raise.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for NorthWestern that investors should think about before committing capital to this stock.

Important note: NorthWestern is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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.

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