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Shareholders will probably not be too impressed with the underwhelming results at United-Guardian, Inc. (NASDAQ:UG) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 18 May 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.
How Does Total Compensation For Ken Globus Compare With Other Companies In The Industry?
At the time of writing, our data shows that United-Guardian, Inc. has a market capitalization of US$68m, and reported total annual CEO compensation of US$441k for the year to December 2020. That's mostly flat as compared to the prior year's compensation. In particular, the salary of US$280.5k, makes up a huge portion of the total compensation being paid to the CEO.
On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$227k. This suggests that Ken Globus is paid more than the median for the industry. Moreover, Ken Globus also holds US$20m worth of United-Guardian 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 58% of total compensation out of all the companies we analyzed, while other remuneration made up 42% of the pie. According to our research, United-Guardian has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
United-Guardian, Inc.'s Growth
Over the last three years, United-Guardian, Inc. has shrunk its earnings per share by 4.9% per year. Its revenue is down 19% over the previous year.
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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has United-Guardian, Inc. Been A Good Investment?
Given the total shareholder loss of 6.4% over three years, many shareholders in United-Guardian, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.
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.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for United-Guardian 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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