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Why We Think Rush Enterprises, Inc.'s (NASDAQ:RUSH.B) CEO Compensation Is Not Excessive At All

Rush Enterprises, Inc. (NASDAQ:RUSH.B) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 18 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 what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

View our latest analysis for Rush Enterprises

Comparing Rush Enterprises, Inc.'s CEO Compensation With the industry

According to our data, Rush Enterprises, Inc. has a market capitalization of US$2.7b, and paid its CEO total annual compensation worth US$6.2m over the year to December 2020. That's a notable decrease of 13% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.3m.

On examining similar-sized companies in the industry with market capitalizations between US$2.0b and US$6.4b, we discovered that the median CEO total compensation of that group was US$5.0m. This suggests that Rush Enterprises remunerates its CEO largely in line with the industry average. Moreover, Rusty Rush also holds US$37m worth of Rush Enterprises 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$1.3m

US$1.5m

21%

Other

US$4.9m

US$5.6m

79%

Total Compensation

US$6.2m

US$7.2m

100%

Speaking on an industry level, nearly 23% of total compensation represents salary, while the remainder of 77% is other remuneration. In Rush Enterprises' case, non-salary compensation represents a greater slice of total remuneration, 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.

ceo-compensation
ceo-compensation

Rush Enterprises, Inc.'s Growth

Over the last three years, Rush Enterprises, Inc. has shrunk its earnings per share by 6.0% per year. In the last year, its revenue is down 19%.

Few shareholders would be pleased to read that EPS have declined. 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. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Rush Enterprises, Inc. Been A Good Investment?

Boasting a total shareholder return of 69% over three years, Rush Enterprises, Inc. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. 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.

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've identified 3 warning signs for Rush Enterprises that investors should be aware of in a dynamic business environment.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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