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Power Integrations, Inc.'s (NASDAQ:POWI) CEO Will Probably Have Their Compensation Approved By Shareholders

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It would be hard to discount the role that CEO Balu Balakrishnan has played in delivering the impressive results at Power Integrations, Inc. (NASDAQ:POWI) recently. Shareholders will have this at the front of their minds in the upcoming AGM on 21 May 2021. The focus will probably be on the future company strategy as shareholders cast their votes on resolutions such as executive remuneration and other matters. Here is our take on why we think CEO compensation is not extravagant.

See our latest analysis for Power Integrations

Comparing Power Integrations, Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Power Integrations, Inc. has a market capitalization of US$4.7b, and reported total annual CEO compensation of US$5.7m for the year to December 2020. This means that the compensation hasn't changed much from last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$638k.

For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$5.5m. From this we gather that Balu Balakrishnan is paid around the median for CEOs in the industry. Furthermore, Balu Balakrishnan directly owns US$22m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2020

2019

Proportion (2020)

Salary

US$638k

US$609k

11%

Other

US$5.1m

US$5.1m

89%

Total Compensation

US$5.7m

US$5.7m

100%

On an industry level, around 13% of total compensation represents salary and 87% is other remuneration. Power Integrations sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
ceo-compensation

A Look at Power Integrations, Inc.'s Growth Numbers

Power Integrations, Inc.'s earnings per share (EPS) grew 51% per year over the last three years. Its revenue is up 25% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. 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 Power Integrations, Inc. Been A Good Investment?

Boasting a total shareholder return of 118% over three years, Power Integrations, 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.

In Summary...

Seeing that the company has put in a relatively good performance, the CEO remuneration policy may not be the focus at the AGM. However, investors will get the chance to engage on key strategic initiatives and future growth opportunities for the company and set their longer-term expectations.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for Power Integrations that you should be aware of before investing.

Important note: Power Integrations is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.