In 2017 Krishnan Rajagopalan was appointed CEO of Heidrick & Struggles International, Inc. (NASDAQ:HSII). First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Krishnan Rajagopalan's Compensation Compare With Similar Sized Companies?
Our data indicates that Heidrick & Struggles International, Inc. is worth US$448m, and total annual CEO compensation was reported as US$4.0m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$850k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a selection of companies with market caps ranging from US$200m to US$800m, we found the median CEO total compensation was US$2.0m.
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Talking in terms of the sector, salary represented approximately 21% of total compensation out of all the companies we analysed, while other remuneration made up 79% of the pie. Our data reveals that Heidrick & Struggles International allocates salary in line with the wider market.
Thus we can conclude that Krishnan Rajagopalan receives more in total compensation than the median of a group of companies in the same market, and of similar size to Heidrick & Struggles International, Inc.. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. You can see a visual representation of the CEO compensation at Heidrick & Struggles International, below.
Is Heidrick & Struggles International, Inc. Growing?
Over the last three years Heidrick & Struggles International, Inc. has seen earnings per share (EPS) move in a positive direction by an average of 73% per year (using a line of best fit). It saw its revenue drop 1.3% over the last year.
This demonstrates that the company has been improving recently. A good result. Revenue growth is a real positive for growth, but ultimately profits are more important. You might want to check this free visual report on analyst forecasts for future earnings.
Has Heidrick & Struggles International, Inc. Been A Good Investment?
Since shareholders would have lost about 2.3% over three years, some Heidrick & Struggles International, Inc. shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
We compared the total CEO remuneration paid by Heidrick & Struggles International, Inc., and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. Shifting gears from CEO pay for a second, we've picked out 1 warning sign for Heidrick & Struggles International that investors should be aware of in a dynamic business environment.
Important note: Heidrick & Struggles International may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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