In 2016 Eric Sills was appointed CEO of Standard Motor Products, Inc. (NYSE:SMP). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Eric Sills's Compensation Compare With Similar Sized Companies?
Our data indicates that Standard Motor Products, Inc. is worth US$1.2b, and total annual CEO compensation is US$1.1m. (This is based on the year to December 2017). While we always look at total compensation first, we note that the salary component is less, at US$580k. We looked at a group of companies with market capitalizations from US$1.0b to US$3.2b, and the median CEO total compensation was US$3.7m.
This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.
You can see a visual representation of the CEO compensation at Standard Motor Products, below.
Is Standard Motor Products, Inc. Growing?
On average over the last three years, Standard Motor Products, Inc. has shrunk earnings per share by 9.2% each year (measured with a line of best fit). In the last year, its revenue is down -2.2%.
Unfortunately, earnings per share have trended lower over the last three years. And the fact that revenue is down year on year arguably paints an ugly picture. 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 Standard Motor Products, Inc. Been A Good Investment?
Boasting a total shareholder return of 58% over three years, Standard Motor Products, Inc. has done well by shareholders. 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.
It looks like Standard Motor Products, Inc. pays its CEO less than similar sized companies.
It's well worth noting that while Eric Sills is paid less than most company leaders (at similar sized companies), there isn't much EPS growth. Having said that, returns to shareholders have been great. So, while it would be nice to have EPS growth, on our analysis the CEO compensation is not an issue. So you may want to check if insiders are buying Standard Motor Products shares with their own money (free access).
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
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If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.