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Why Stanley Black & Decker's (NYSE:SWK) CEO Pay Matters

Simply Wall St
·4 min read

Jim Loree has been the CEO of Stanley Black & Decker, Inc. (NYSE:SWK) since 2016, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Stanley Black & Decker.

Check out our latest analysis for Stanley Black & Decker

How Does Total Compensation For Jim Loree Compare With Other Companies In The Industry?

According to our data, Stanley Black & Decker, Inc. has a market capitalization of US$24b, and paid its CEO total annual compensation worth US$19m over the year to December 2019. Notably, that's an increase of 38% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.3m.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$8.5m. Accordingly, our analysis reveals that Stanley Black & Decker, Inc. pays Jim Loree north of the industry median. Moreover, Jim Loree also holds US$18m worth of Stanley Black & Decker stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2019

2018

Proportion (2019)

Salary

US$1.3m

US$1.3m

7%

Other

US$17m

US$12m

93%

Total Compensation

US$19m

US$14m

100%

Speaking on an industry level, nearly 16% of total compensation represents salary, while the remainder of 84% is other remuneration. Stanley Black & Decker pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
ceo-compensation

A Look at Stanley Black & Decker, Inc.'s Growth Numbers

Over the last three years, Stanley Black & Decker, Inc. has shrunk its earnings per share by 8.2% per year. The trailing twelve months of revenue was pretty much the same as the prior period.

Overall this is not a very positive result for shareholders. And the flat revenue hardly impresses. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Stanley Black & Decker, Inc. Been A Good Investment?

Stanley Black & Decker, Inc. has generated a total shareholder return of 17% over three years, so most shareholders would be reasonably content. 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.

In Summary...

As we touched on above, Stanley Black & Decker, Inc. is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This doesn't look great when you realize that the company has been suffering from negative earnings growth for the last three years. And shareholder returns are decent but not great. So you can understand why we do not think CEO compensation is particularly modest!

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 did our research and spotted 3 warning signs for Stanley Black & Decker that investors should look into moving forward.

Important note: Stanley Black & Decker is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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@simplywallst.com.