David Anderson has been the CEO of Northwest Natural Holding Company (NYSE:NWN) since 2016, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Northwest Natural Holding Company's CEO Compensation With the industry
Our data indicates that Northwest Natural Holding Company has a market capitalization of US$1.4b, and total annual CEO compensation was reported as US$4.3m for the year to December 2019. Notably, that's an increase of 17% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$706k.
On examining similar-sized companies in the industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$3.8m. So it looks like Northwest Natural Holding compensates David Anderson in line with the median for the industry. What's more, David Anderson holds US$4.4m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 18% of total compensation represents salary and 82% is other remuneration. Although there is a difference in how total compensation is set, Northwest Natural Holding more or less reflects the market in terms of setting the salary. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Northwest Natural Holding Company's Growth Numbers
Over the last three years, Northwest Natural Holding Company has shrunk its earnings per share by 3.9% per year. It achieved revenue growth of 4.3% over the last year.
Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. 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 Northwest Natural Holding Company Been A Good Investment?
Given the total shareholder loss of 23% over three years, many shareholders in Northwest Natural Holding Company are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
As previously discussed, David is compensated close to the median for companies of its size, and which belong to the same industry. In the meantime, the company has reported declining EPS growth and shareholder returns over 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 identified 2 warning signs for Northwest Natural Holding (1 doesn't sit too well with us!) that you should be aware of before investing here.
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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