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Is Tennant Company's (NYSE:TNC) CEO Pay Justified?

Simply Wall St

H. Killingstad has been the CEO of Tennant Company (NYSE:TNC) since 2005. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for Tennant

How Does H. Killingstad's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Tennant Company has a market cap of US$1.2b, and reported total annual CEO compensation of US$4.2m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$766k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations from US$1.0b to US$3.2b, and the median CEO total compensation was US$4.1m.

So H. Killingstad receives a similar amount to the median CEO pay, amongst the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.

The graphic below shows how CEO compensation at Tennant has changed from year to year.

NYSE:TNC CEO Compensation, October 2nd 2019

Is Tennant Company Growing?

Tennant Company has reduced its earnings per share by an average of 12% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is up 1.3%.

Few shareholders would be pleased to read that earnings per share are lower over three years. And the modest revenue growth over 12 months isn't much comfort against the reduced earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.

Has Tennant Company Been A Good Investment?

Tennant Company has generated a total shareholder return of 10% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

H. Killingstad is paid around the same as most CEOs of similar size companies.

We feel that earnings per share have been a bit disappointing, but and we don't think the total returns are amazing. We do not think the CEO pay is a problem, but it's probably fair to say that many shareholders would like to see improved performance, before any pay rise occurs. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Tennant.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.