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Should Shareholders Reconsider Whitestone REIT's (NYSE:WSR) CEO Compensation Package?

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·4 min read
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The results at Whitestone REIT (NYSE:WSR) have been quite disappointing recently and CEO Jim Mastandrea bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 13 May 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

See our latest analysis for Whitestone REIT

How Does Total Compensation For Jim Mastandrea Compare With Other Companies In The Industry?

Our data indicates that Whitestone REIT has a market capitalization of US$407m, and total annual CEO compensation was reported as US$3.1m for the year to December 2020. Notably, that's an increase of 18% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$600k.

On comparing similar companies from the same industry with market caps ranging from US$200m to US$800m, we found that the median CEO total compensation was US$2.2m. Accordingly, our analysis reveals that Whitestone REIT pays Jim Mastandrea north of the industry median. Furthermore, Jim Mastandrea directly owns US$12m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2020

2019

Proportion (2020)

Salary

US$600k

US$600k

19%

Other

US$2.5m

US$2.0m

81%

Total Compensation

US$3.1m

US$2.6m

100%

On an industry level, around 15% of total compensation represents salary and 85% is other remuneration. According to our research, Whitestone REIT has allocated a higher percentage of pay to salary in comparison to the wider industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

A Look at Whitestone REIT's Growth Numbers

Over the last three years, Whitestone REIT has shrunk its funds from operations (FFO) by 1.7% per year. Its revenue is down 3.2% over the previous year.

Its a bit disappointing to see that the company has failed to grow its FFO. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Whitestone REIT Been A Good Investment?

Since shareholders would have lost about 1.8% over three years, some Whitestone REIT investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 4 warning signs (and 1 which can't be ignored) in Whitestone REIT we think you should know about.

Switching gears from Whitestone REIT, 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.

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