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Jamie Farrar became the CEO of City Office REIT, Inc. (NYSE:CIO) in 2014, 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 City Office REIT pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing City Office REIT, Inc.'s CEO Compensation With the industry
Our data indicates that City Office REIT, Inc. has a market capitalization of US$451m, and total annual CEO compensation was reported as US$2.1m for the year to December 2019. We note that's an increase of 31% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$400k.
In comparison with other companies in the industry with market capitalizations ranging from US$200m to US$800m, the reported median CEO total compensation was US$2.1m. This suggests that City Office REIT remunerates its CEO largely in line with the industry average. What's more, Jamie Farrar holds US$3.6m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
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. According to our research, City Office REIT has allocated a higher percentage of pay to salary in comparison to the wider industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
City Office REIT, Inc.'s Growth
City Office REIT, Inc. has reduced its earnings per share by 33% a year over the last three years. It achieved revenue growth of 18% over the last year.
The decrease in earnings could be a concern for some investors. But in contrast the revenue growth is strong, suggesting future potential for earnings growth. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has City Office REIT, Inc. Been A Good Investment?
Since shareholders would have lost about 5.9% over three years, some City Office REIT, Inc. investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
As previously discussed, Jamie is compensated close to the median for companies of its size, and which belong to the same industry. But revenue growth seems to be inching northward, a heartening sign for the company. In contrast, over the same time span, shareholder returns are negative. EPS is also not growing, undoubtedly leading to further headaches. We'd say CEO compensation isn't unfair, but shareholders may be wary of a bump in pay before the company substantially improves overall performance.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for City Office REIT (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the stock.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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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