It's Unlikely That Shareholders Will Increase Mercer International Inc.'s (NASDAQ:MERC) Compensation By Much This Year
The anaemic share price growth at Mercer International Inc. (NASDAQ:MERC) over the past few years has probably not impressed shareholders and may be due to earnings not growing over that period. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 28 May 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
Check out our latest analysis for Mercer International
Comparing Mercer International Inc.'s CEO Compensation With the industry
Our data indicates that Mercer International Inc. has a market capitalization of US$980m, and total annual CEO compensation was reported as US$2.6m for the year to December 2020. That's a notable increase of 37% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$639k.
In comparison with other companies in the industry with market capitalizations ranging from US$400m to US$1.6b, the reported median CEO total compensation was US$2.6m. From this we gather that David Gandossi is paid around the median for CEOs in the industry. Moreover, David Gandossi also holds US$2.8m worth of Mercer International stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$639k | US$628k | 24% |
Other | US$2.0m | US$1.3m | 76% |
Total Compensation | US$2.6m | US$1.9m | 100% |
On an industry level, around 18% of total compensation represents salary and 82% is other remuneration. Mercer International pays out 24% of remuneration in the form of a salary, significantly higher than the industry average. 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 Mercer International Inc.'s Growth Numbers
Over the last three years, Mercer International Inc. has shrunk its earnings per share by 82% per year. In the last year, its revenue changed by just 0.4%.
Overall this is not a very positive result for shareholders. And the flat revenue is seriously uninspiring. 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 Mercer International Inc. Been A Good Investment?
Mercer International Inc. has not done too badly by shareholders, with a total return of 2.0%, over three years. It would be nice to see that metric improve in the future. Accordingly, a proposal to increase CEO remuneration without seeing an improvement in shareholder returns might not be met favorably by most shareholders.
To Conclude...
The lacklustre share price returns along with the lack of earnings growth makes us think that a strong rebound in the share price may be difficult. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
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 3 warning signs (and 1 which is potentially serious) in Mercer International we think you should know about.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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