This article will reflect on the compensation paid to Kurt Darrow who has served as CEO of La-Z-Boy Incorporated (NYSE:LZB) since 2003. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for La-Z-Boy

Comparing La-Z-Boy Incorporated's CEO Compensation With the industry

According to our data, La-Z-Boy Incorporated has a market capitalization of US$2.0b, and paid its CEO total annual compensation worth US$5.3m over the year to April 2020. That's a notable decrease of 20% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.0m.

For comparison, other companies in the same industry with market capitalizations ranging between US$1.0b and US$3.2b had a median total CEO compensation of US$5.3m. From this we gather that Kurt Darrow is paid around the median for CEOs in the industry. Moreover, Kurt Darrow also holds US$20m worth of La-Z-Boy stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, around 28% of total compensation represents salary and 72% is other remuneration. La-Z-Boy sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

La-Z-Boy Incorporated's Growth

La-Z-Boy Incorporated has reduced its earnings per share by 1.9% a year over the last three years. Its revenue is down 11% over the previous year.

A lack of EPS improvement is not good to see. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has La-Z-Boy Incorporated Been A Good Investment?

Boasting a total shareholder return of 44% over three years, La-Z-Boy Incorporated has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

As we touched on above, La-Z-Boy Incorporated is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This doesn't look good when you see that EPS growth over the last three years has been negative. On the other hand, shareholder returns are showing positive trends over the same time frame. We're not saying CEO compensation is too generous, but shrinking EPS is undoubtedly an issue that will have to be addressed.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 2 warning signs for La-Z-Boy that investors should be aware of in a dynamic business environment.

Important note: La-Z-Boy 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 (at) simplywallst.com.