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Why Martinrea International's (TSE:MRE) CEO Pay Matters

Simply Wall St
·3 mins read

This article will reflect on the compensation paid to Pat D'Eramo who has served as CEO of Martinrea International Inc. (TSE:MRE) since 2014. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Martinrea International

Comparing Martinrea International Inc.'s CEO Compensation With the industry

Our data indicates that Martinrea International Inc. has a market capitalization of CA$848m, and total annual CEO compensation was reported as CA$4.6m for the year to December 2019. That's just a smallish increase of 6.8% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at CA$818k.

On examining similar-sized companies in the industry with market capitalizations between CA$530m and CA$2.1b, we discovered that the median CEO total compensation of that group was CA$4.4m. This suggests that Martinrea International remunerates its CEO largely in line with the industry average. Furthermore, Pat D'Eramo directly owns CA$1.8m worth of shares in the company.

Component

2019

2018

Proportion (2019)

Salary

CA$818k

CA$818k

18%

Other

CA$3.8m

CA$3.5m

82%

Total Compensation

CA$4.6m

CA$4.3m

100%

Speaking on an industry level, nearly 18% of total compensation represents salary, while the remainder of 82% is other remuneration. There isn't a significant difference between Martinrea International and the broader market, in terms of salary allocation in the overall compensation package. 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 Martinrea International Inc.'s Growth Numbers

Over the last three years, Martinrea International Inc. has shrunk its earnings per share by 12% per year. In the last year, its revenue is down 14%.

The decline in EPS is a bit concerning. 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. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Martinrea International Inc. Been A Good Investment?

Since shareholders would have lost about 11% over three years, some Martinrea International Inc. investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As we noted earlier, Martinrea International pays its CEO in line with similar-sized companies belonging to the same industry. On the other hand, EPS growth and total shareholder return have been negative for the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.

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 2 warning signs (and 1 which is potentially serious) in Martinrea International we think you should know about.

Switching gears from Martinrea International, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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@simplywallst.com.