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We Think Empire State Realty Trust, Inc.'s (NYSE:ESRT) CEO Compensation Package Needs To Be Put Under A Microscope

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Shareholders will probably not be too impressed with the underwhelming results at Empire State Realty Trust, Inc. (NYSE:ESRT) recently. At the upcoming AGM on 13 May 2021, shareholders can hear from the board including their plans for turning around performance. 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. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Empire State Realty Trust

How Does Total Compensation For Tony Malkin Compare With Other Companies In The Industry?

At the time of writing, our data shows that Empire State Realty Trust, Inc. has a market capitalization of US$3.3b, and reported total annual CEO compensation of US$10m for the year to December 2020. That's a notable decrease of 9.0% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$514k.

For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$5.4m. Hence, we can conclude that Tony Malkin is remunerated higher than the industry median. What's more, Tony Malkin holds US$8.3m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component

2020

2019

Proportion (2020)

Salary

US$514k

US$810k

5%

Other

US$9.6m

US$10m

95%

Total Compensation

US$10m

US$11m

100%

Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. Empire State Realty Trust pays a modest slice of remuneration through salary, as compared to the broader 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 Empire State Realty Trust, Inc.'s Growth Numbers

Over the last three years, Empire State Realty Trust, Inc. has shrunk its funds from operations (FFO) by 18% per year. In the last year, its revenue is down 21%.

The decline in FFO is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. 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 Empire State Realty Trust, Inc. Been A Good Investment?

Given the total shareholder loss of 27% over three years, many shareholders in Empire State Realty Trust, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a 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 is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 1 warning sign for Empire State Realty Trust 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.

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