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Steve Downing became the CEO of Gentex Corporation (NASDAQ:GNTX) in 2018, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
How Does Total Compensation For Steve Downing Compare With Other Companies In The Industry?
Our data indicates that Gentex Corporation has a market capitalization of US$6.7b, and total annual CEO compensation was reported as US$3.1m for the year to December 2019. Notably, that's a decrease of 11% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$734k.
In comparison with other companies in the industry with market capitalizations ranging from US$4.0b to US$12b, the reported median CEO total compensation was US$3.1m. This suggests that Gentex remunerates its CEO largely in line with the industry average. Furthermore, Steve Downing directly owns US$3.8m worth of shares in the company, implying that they are deeply invested in the company's success.
Speaking on an industry level, nearly 24% of total compensation represents salary, while the remainder of 76% is other remuneration. There isn't a significant difference between Gentex and the broader market, in terms of salary allocation in the overall compensation package. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Gentex Corporation's Growth
Over the last three years, Gentex Corporation has shrunk its earnings per share by 2.0% per year. It saw its revenue drop 13% over the last year.
Its a bit disappointing to see that the company has failed to grow its earnings. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Gentex Corporation Been A Good Investment?
Most shareholders would probably be pleased with Gentex Corporation for providing a total return of 68% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
As we noted earlier, Gentex pays its CEO in line with similar-sized companies belonging to the same industry. This isn't great when you look at it against the backdrop of earnings growth, which has been negative for the past three years. On the flip side, shareholder returns have been strong over the same time, which is certainly a positive sign. We're not saying CEO compensation is too generous, but shareholders might think performance needs to be improved before paying any more.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 1 warning sign for Gentex that investors should be aware of in a dynamic business environment.
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.
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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