This article will reflect on the compensation paid to Chuck MacFarlane who has served as CEO of Otter Tail Corporation (NASDAQ:OTTR) since 2015. This analysis will also assess whether Otter Tail pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
How Does Total Compensation For Chuck MacFarlane Compare With Other Companies In The Industry?
At the time of writing, our data shows that Otter Tail Corporation has a market capitalization of US$1.7b, and reported total annual CEO compensation of US$5.8m for the year to December 2019. That's a notable increase of 72% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$700k.
On comparing similar companies from the same industry with market caps ranging from US$1.0b to US$3.2b, we found that the median CEO total compensation was US$957k. Hence, we can conclude that Chuck MacFarlane is remunerated higher than the industry median. Furthermore, Chuck MacFarlane directly owns US$7.8m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, around 14% of total compensation represents salary and 86% is other remuneration. It's interesting to note that Otter Tail allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Otter Tail Corporation's Growth Numbers
Over the past three years, Otter Tail Corporation has seen its earnings per share (EPS) grow by 7.4% per year. Its revenue is down 5.6% over the previous year.
We would argue that the lack of revenue growth in the last year is less than ideal, but the modest improvement in EPS is good. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Otter Tail Corporation Been A Good Investment?
Otter Tail Corporation has not done too badly by shareholders, with a total return of 6.7%, over three years. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
As we noted earlier, Otter Tail pays its CEO higher than the norm for similar-sized companies belonging to the same industry. However, EPS growth is not moving in the right direction, and the returns to shareholders could have been better, over the last three years. We'd stop short of saying CEO pay is inappropriate, but we'd like to see healthier business growth from the company, moving forward.
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. That's why we did some digging and identified 1 warning sign for Otter Tail 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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