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The share price of Knowles Corporation (NYSE:KN) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 27 April 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.
How Does Total Compensation For Jeff Niew Compare With Other Companies In The Industry?
Our data indicates that Knowles Corporation has a market capitalization of US$1.9b, and total annual CEO compensation was reported as US$4.7m for the year to December 2020. That's mostly flat as compared to the prior year's compensation. We think total compensation is more important but our data shows that the CEO salary is lower, at US$610k.
In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$3.7m. So it looks like Knowles compensates Jeff Niew in line with the median for the industry. Furthermore, Jeff Niew directly owns US$6.1m worth of shares in the company, implying that they are deeply invested in the company's success.
Speaking on an industry level, nearly 29% of total compensation represents salary, while the remainder of 71% is other remuneration. It's interesting to note that Knowles allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Knowles Corporation's Growth
Knowles Corporation has reduced its earnings per share by 24% a year over the last three years. In the last year, its revenue is down 11%.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Knowles Corporation Been A Good Investment?
We think that the total shareholder return of 89%, over three years, would leave most Knowles Corporation shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 3 warning signs for Knowles that you should be aware of before investing.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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