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Bowen Diehl became the CEO of Capital Southwest Corporation (NASDAQ:CSWC) in 2015, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Capital Southwest.
How Does Total Compensation For Bowen Diehl Compare With Other Companies In The Industry?
At the time of writing, our data shows that Capital Southwest Corporation has a market capitalization of US$274m, and reported total annual CEO compensation of US$1.7m for the year to March 2020. That's a notable decrease of 29% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$454k.
On comparing similar companies from the same industry with market caps ranging from US$100m to US$400m, we found that the median CEO total compensation was US$925k. This suggests that Bowen Diehl is paid more than the median for the industry. What's more, Bowen Diehl holds US$6.9m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 13% of total compensation represents salary, while the remainder of 87% is other remuneration. Capital Southwest pays out 26% of remuneration in the form of a salary, significantly higher than the industry average. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Capital Southwest Corporation's Growth Numbers
Over the last three years, Capital Southwest Corporation has shrunk its earnings per share by 51% per year. Its revenue is up 8.5% over the last year.
Overall this is not a very positive result for shareholders. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Capital Southwest Corporation Been A Good Investment?
Capital Southwest Corporation has served shareholders reasonably well, with a total return of 26% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
As we touched on above, Capital Southwest Corporation is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Meanwhile, EPS has not been growing sufficiently to impress us, over the last three years. And shareholder returns are decent but not great. So we think more research is needed, but we don't think the CEO is underpaid.
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 potentially serious) in Capital Southwest we think you should know about.
Important note: Capital Southwest 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.
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