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John O'Donnell became the CEO of Neenah, Inc. (NYSE:NP) in 2011. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does John O'Donnell's Compensation Compare With Similar Sized Companies?
According to our data, Neenah, Inc. has a market capitalization of US$1.2b, and paid its CEO total annual compensation worth US$3.0m over the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$830k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. When we examined a selection of companies with market caps ranging from US$1.0b to US$3.2b, we found the median CEO total compensation was US$3.9m.
So John O'Donnell is paid around the average of the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.
You can see, below, how CEO compensation at Neenah has changed over time.
Is Neenah, Inc. Growing?
On average over the last three years, Neenah, Inc. has shrunk earnings per share by 21% each year (measured with a line of best fit). In the last year, its revenue is down 7.0%.
Sadly for shareholders, earnings per share are actually down, over three years. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.
Has Neenah, Inc. Been A Good Investment?
Since shareholders would have lost about 12% over three years, some Neenah, Inc. shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
Remuneration for John O'Donnell is close enough to the median pay for a CEO of a similar sized company .
After looking at EPS and total shareholder returns, it's certainly hard to argue the company has performed well, since both metrics are down. Most would consider it prudent for the company to hold off any CEO pay rise until performance improves. Whatever your view on compensation, you might want to check if insiders are buying or selling Neenah shares (free trial).
Important note: Neenah may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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