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Is Otter Tail Corporation (NASDAQ:OTTR) Excessively Paying Its CEO?

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Simply Wall St
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In 2015 Chuck MacFarlane was appointed CEO of Otter Tail Corporation (NASDAQ:OTTR). First, this article will compare CEO compensation with compensation at similar sized companies. 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. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Otter Tail

How Does Chuck MacFarlane's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Otter Tail Corporation has a market cap of US$2.0b, and reported total annual CEO compensation of US$3.3m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$650k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$1.0b to US$3.2b. The median total CEO compensation was US$3.9m.

That means Chuck MacFarlane receives fairly typical remuneration for the CEO of a company that size. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance.

You can see, below, how CEO compensation at Otter Tail has changed over time.

NasdaqGS:OTTR CEO Compensation, December 16th 2019
NasdaqGS:OTTR CEO Compensation, December 16th 2019

Is Otter Tail Corporation Growing?

Over the last three years Otter Tail Corporation has grown its earnings per share (EPS) by an average of 9.3% per year (using a line of best fit). It achieved revenue growth of 2.6% over the last year.

I would argue that the improvement in revenue isn't particularly impressive, but it is good to see modest EPS growth. So there are some positives here, but not enough to earn high praise. You might want to check this free visual report on analyst forecasts for future earnings.

Has Otter Tail Corporation Been A Good Investment?

Most shareholders would probably be pleased with Otter Tail Corporation for providing a total return of 33% over three years. 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.

In Summary...

Remuneration for Chuck MacFarlane is close enough to the median pay for a CEO of a similar sized company .

The company isn't showing particularly great growth, but shareholder returns have been pleasing. So considering most shareholders would be happy, we'd say the CEO pay is appropriate. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Otter Tail (free visualization of insider trades).

If you want to buy a stock that is better than Otter Tail, this free list of high return, low debt companies is a great place to look.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.