The results at Spirit AeroSystems Holdings, Inc. (NYSE:SPR) have been quite disappointing recently and CEO Tom Gentile bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 28 April 2021. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.
How Does Total Compensation For Tom Gentile Compare With Other Companies In The Industry?
According to our data, Spirit AeroSystems Holdings, Inc. has a market capitalization of US$4.7b, and paid its CEO total annual compensation worth US$10m over the year to December 2020. That's a slight decrease of 5.6% on the prior year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.1m.
On examining similar-sized companies in the industry with market capitalizations between US$2.0b and US$6.4b, we discovered that the median CEO total compensation of that group was US$8.0m. Hence, we can conclude that Tom Gentile is remunerated higher than the industry median. What's more, Tom Gentile holds US$10m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 17% of total compensation represents salary, while the remainder of 83% is other remuneration. Spirit AeroSystems Holdings sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at Spirit AeroSystems Holdings, Inc.'s Growth Numbers
Spirit AeroSystems Holdings, Inc. has reduced its earnings per share by 66% a year over the last three years. Its revenue is down 57% over the previous year.
Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Spirit AeroSystems Holdings, Inc. Been A Good Investment?
Few Spirit AeroSystems Holdings, Inc. shareholders would feel satisfied with the return of -43% over three years. So shareholders would probably want the company to be less generous with CEO compensation.
Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Spirit AeroSystems Holdings that you should be aware of before investing.
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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