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The share price of Churchill Downs Incorporated (NASDAQ:CHDN) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. Some of these issues will occupy shareholders' minds as the AGM rolls around on 20 April 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.
How Does Total Compensation For Bill Carstanjen Compare With Other Companies In The Industry?
At the time of writing, our data shows that Churchill Downs Incorporated has a market capitalization of US$8.3b, and reported total annual CEO compensation of US$10m for the year to December 2020. That is, the compensation was roughly the same as last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.4m.
For comparison, other companies in the same industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$6.5m. This suggests that Bill Carstanjen is paid more than the median for the industry. Moreover, Bill Carstanjen also holds US$118m worth of Churchill Downs stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 25% of total compensation out of all the companies we analyzed, while other remuneration made up 75% of the pie. In Churchill Downs' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Churchill Downs Incorporated's Growth Numbers
Over the last three years, Churchill Downs Incorporated has shrunk its earnings per share by 49% per year. In the last year, its revenue is down 21%.
Overall this is not a very positive result for shareholders. 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 Churchill Downs Incorporated Been A Good Investment?
Boasting a total shareholder return of 171% over three years, Churchill Downs Incorporated has done well by shareholders. 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.
While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. In our study, we found 3 warning signs for Churchill Downs you should be aware of, and 1 of them is significant.
Switching gears from Churchill Downs, 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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