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How Much Did International Bancshares Corporation’s (NASDAQ:IBOC) CEO Pocket Last Year?

Asher Wright

Dennis Nixon took the helm as International Bancshares Corporation’s (NASDAQ:IBOC) CEO and grew market cap to US$3.07b recently. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. Today we will assess Nixon’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability.

Check out our latest analysis for International Bancshares

What has IBOC’s performance been like?

Performance can be measured based on factors such as earnings and total shareholder return (TSR). I believe earnings is a cleaner proxy, since many factors can impact share price, and therefore, TSR. Recently, IBOC delivered an earnings of US$191.17m , which is an increase of 32.91% from its previous year’s earnings of US$143.83m. This is a positive indication that IBOC has strived to maintain a good track record of profitability in the face of any headwinds. Given earnings are moving the right way, CEO pay should be reflective of Nixon’s valued-adding activities. During the same period, Nixon’s total compensation increased by 14.41% to US$2.11m.

NasdaqGS:IBOC Past Future Earnings August 21st 18
NasdaqGS:IBOC Past Future Earnings August 21st 18

What’s a reasonable CEO compensation?

Even though no standard benchmark exists, as remuneration should be tailored to the specific company and market, we can evaluate a high-level base line to see if IBOC deviates substantially from its peers. This exercise can help shareholders ask the right question about Nixon’s incentive alignment. Generally, a US mid-cap is worth around $5B, produces earnings of $290M and remunerates its CEO circa $5.3M per year. Considering the size of IBOC in terms of market cap, as well as its performance, using earnings as a proxy, it appears that Nixon is paid on a similar level to the average US mid-cap CEO This could mean Nixon is paid a suitable level.

Next Steps:

You can breathe easy knowing that shareholder funds aren’t being used to overpay IBOC’s CEO. However, on the flipside, you should ask whether Nixon is appropriately remunerated on the basis of retention. Its important for shareholders to be active in voting governance decisions, as board members are only representatives of investors’ voices. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Governance: To find out more about IBOC’s governance, look through our infographic report of the company’s board and management.

  2. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of IBOC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.