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Amit Munshi became the CEO of Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) in 2016, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Arena Pharmaceuticals, Inc.'s CEO Compensation With the industry
According to our data, Arena Pharmaceuticals, Inc. has a market capitalization of US$3.6b, and paid its CEO total annual compensation worth US$8.9m over the year to December 2019. That's a notable increase of 30% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$656k.
For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$7.6m. This suggests that Arena Pharmaceuticals remunerates its CEO largely in line with the industry average. Furthermore, Amit Munshi directly owns US$491k worth of shares in the company.
Talking in terms of the industry, salary represented approximately 23% of total compensation out of all the companies we analyzed, while other remuneration made up 77% of the pie. Arena Pharmaceuticals pays a modest slice of remuneration through salary, as compared 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.
A Look at Arena Pharmaceuticals, Inc.'s Growth Numbers
Arena Pharmaceuticals, Inc.'s earnings per share (EPS) grew 26% per year over the last three years. It has seen most of its revenue evaporate over the past year.
This demonstrates that the company has been improving recently and is good news for the shareholders. While it would be good to see revenue growth, profits matter more in the end. 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 Arena Pharmaceuticals, Inc. Been A Good Investment?
Most shareholders would probably be pleased with Arena Pharmaceuticals, Inc. for providing a total return of 159% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
As previously discussed, Amit is compensated close to the median for companies of its size, and which belong to the same industry. Investors would surely be happy to see that returns have been great, and that EPS is up. Although the pay is close to the industry median, overall performance is excellent, so we don't think the CEO is paid too generously. In fact, shareholders might even think the CEO deserves a raise as a reward due to the fantastic returns generated.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 2 warning signs for Arena Pharmaceuticals that investors should look into moving forward.
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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