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Mike Cote became the CEO of SecureWorks Corp. (NASDAQ:SCWX) in 2015, 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 SecureWorks pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing SecureWorks Corp.'s CEO Compensation With the industry
Our data indicates that SecureWorks Corp. has a market capitalization of US$990m, and total annual CEO compensation was reported as US$4.5m for the year to January 2020. We note that's an increase of 24% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$500k.
For comparison, other companies in the same industry with market capitalizations ranging between US$400m and US$1.6b had a median total CEO compensation of US$3.2m. Hence, we can conclude that Mike Cote is remunerated higher than the industry median. Moreover, Mike Cote also holds US$15m worth of SecureWorks stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
On an industry level, around 12% of total compensation represents salary and 88% is other remuneration. Our data reveals that SecureWorks allocates salary more or less in line with the wider market. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at SecureWorks Corp.'s Growth Numbers
Over the last three years, SecureWorks Corp. has shrunk its earnings per share by 8.2% per year. It achieved revenue growth of 5.6% over the last year.
Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. 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 SecureWorks Corp. Been A Good Investment?
With a total shareholder return of 12% over three years, SecureWorks Corp. shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
As previously discussed, Mike is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Meanwhile, EPS has not been growing sufficiently to impress us, over the last three years. While shareholder returns are acceptable, they don't delight. So we think more research is needed, but we don't think the CEO is underpaid.
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 2 warning signs for SecureWorks (of which 1 is concerning!) that you should know about in order to have a holistic understanding of the stock.
Switching gears from SecureWorks, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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